TREASURIES-Long-dated debt rises on bargain-hunting

* Market pares losses tied to next week's $118 bln supply

* Stock market decline revives some safety bid for bonds

* Speculation over a Fed discount rate hike lingers

* U.S. yield curve hits fresh year-to-date tight (Recasts lead, updates market action)

By Richard Leong

NEW YORK, March 19 (Reuters) - Long-dated U.S. Treasuries rose on Friday, as bargain-hunting emerged in the wake of losses tied to next week's supply and a sell-off on Wall Street revived some safe-haven demand for bonds.

Moreover, analysts said the bond market has been supported by ongoing concerns over Greece's fiscal problems after the debt-laden nation said it could seek help from the International Monetary Fund if it gets no aid commitment from its European neighbors. [ID:nLDE62I0YK]

Treasuries initially traded lower, as investors were making space for a combined $118 billion in two-year, five-year and seven-year notes.

"The sell-off in the past couple of days seemed overdone," said Christian Cooper, an interest rate strategist with RBC Capital Markets in New York.

The price on benchmark 10-year Treasury notes US10YT=RR traded up 4/32 at 99-23/32, erasing an earlier loss of 10/32. Their yield which moves inversely to their price slipped to 3.66 percent, down from 3.68 percent late on Thursday.

The 10-year yield is on track for its first weekly fall in three weeks.

Two-year notes US2YT=RR were down 1/32 in price to yield 0.97 percent, up nearly 2 basis points from late Thursday.

The spread between 10-year and two-year yields, a barometer of the market's inflation expectations, shrank to 269 basis points, the tightest level so far this year.

Major U.S. stock indexes were down as much as 0.8 percent on lower energy shares. For more, see [.N]

PENDING SUPPLY

The Treasury Department will sell $44 billion in two-year debt on Tuesday; $42 billion in five-year notes on Wednesday and $32 billion in seven-year debt on Thursday. New money from these auctions will help fund an expected $1.5 trillion federal deficit in fiscal 2010.

Analysts anticipate solid bidding for the new debt as demand for Treasuries has remained strong despite worries over the U.S. budget gap and the risks to its triple-A debt rating.

"There is a lot of supply out there, but the demand is still enough to sop it up," said Bob Whalen, a principal with Tower Bridge Advisors in West Conshohocken, Pennsylvania.

In the absence of top-tier data, there was lingering speculation over whether the Federal Reserve will raise interest rates on direct loans it makes to banks to remove excess reserves from the banking system.

The $1 trillion in excess bank reserves has worried some economists on views they would cause a resurgence in inflation when the economy gains speed.

On Thursday, chatter of a discount rate hike, which would be the second since Feb. 18, knocked the euro to session lows against the dollar and exerted downward pressure on U.S. short-term interest rates futures. A Fed spokesperson, when asked about this market speculation, said the Fed does not comment on rumors.

The rate hike chatter emerged two days after the Federal Open Market Committee reaffirmed its pledge to stick to a near-zero interest rate policy in a bid to support economic recovery.

The discount rate stands at 0.75 percent, 50 basis points above the top end of the Fed's range of its policy rate.

"To harp on the discount rate, to make rumors of such a hike yesterday the market centerpiece more than the dovish CPI report is an example of fool's gold," CRT Capital analysts said in a research note on Friday. (Editing by Andrea Ricci)