TREASURIES-Slip in Asia as stocks rise, Bernanke eyed

TOKYO Feb 22 (Reuters) - U.S. Treasuries slipped in Asia on Monday, hurt by gains in regional stocks and by jitters over this week's record $126 billion of debt on offer from the government.

* Activity was subdued as traders awaited U.S. Federal Reserve Chairman Ben Bernanke's testimony before Congress later in the week after the Fed surprised markets on Thursday with a lift in its discount rate. The Fed, meanwhile, left its benchmark federal funds rate unchanged near zero. [ID:nSGE61I04S]

* The discount rate rise initially sparked a sell-off in bonds, with two-year yields hitting their highest in a month, as some took the Fed's step as a sign the central bank could raise its benchmark Fed funds rate sooner than expected.

* But the market recovered ground late last week after Fed officials insisted the discount rate increase did not signal a change in monetary policy and said borrowing costs would stay low. [ID:nN19113048]

* "Bernanke is likely to try to further cool market speculation about rate tightening," said Yasutoshi Nagai, chief economist at Daiwa Securities Capital Markets. "Investors are likely to buy shorter-dated notes, with the yield curve bull-steepening."

* The two-year/10-year yield spread stood at 287 basis points, hovering near the 288 basis points hit the previous week, its widest since the two-year maturity first started trading in the 1970s.

* March futures on the 10-year note TYv1 edged down 2/32 to 117-4/32.

* The 10-year Treasury note US10YT=RR fell 5/32 in price to 3.796 percent, up nearly 2 bps from Friday's late U.S. levels.

* The two-year note US2YT=RR was unchanged in price to yield at 0.924 percent, off a one-month peak of 0.972 percent reached on Friday. The 30-year bond US30YT=RR slid 7/32 in price to yield 4.719 percent.

* Tokyo's Nikkei stock average .N225 jumped 3 percent at one point on Monday, while the MSCI index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 2.3 percent.

* The Treasury plans to sell 30-year inflation-indexed notes later in the day. It will also offer two-year, five-year and seven-year conventional debt later in the week. (Reporting by Rika Otsuka; Editing by Joseph Radford)