TREASURIES-Bonds plunge as euro rescue hammers safe havens

* Bonds tumble on euro rescue

* Slide may hurt this week's $78 bln in bond supply

By Burton Frierson

NEW YORK, May 10 (Reuters) - U.S. Treasuries tumbled on Monday after a $1 trillion plan to halt the euro zone's burgeoning debt crisis relieved investors of the fear that sent them scurrying into safe-haven government bonds last week.

The European Union agreed an emergency loan package that combined with the International Monetary Fund support could reach 750 billion euros to stop Greece's sovereign debt crisis from spreading to other fiscally troubled euro zone countries.

Euro zone central banks began the initiative by buying government bonds under the plan in an effort to support fractured markets, boosting debt of fringe countries such as Greece -- a step they had resisted as late as last week. See details [ID:nLDE649051]

Safe havens such as German Bunds and U.S. Treasuries plunged on hopes that the rescue plan would succeed in restoring stability to global financial markets, especially hard-hit stocks.

"It's a risk-on kind of trade today after last week's debacle," said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco.

"The sovereign debt markets that were safe-haven trades last week are getting pounded today as equities recover pretty significantly and the dollar is lower."

The benchmark 10-year Treasury note US10YT=RR tumbled more than a point in price and was last down 1-4/32, pushing its yield up to 3.57 percent from Friday's close of 3.44 percent.

The yield is also well up from last week's five-month low of 3.27 percent.

While apparently positive for most financial markets, the unwinding of the recent safe-haven gains hurts Treasuries just as the market was preparing to bid for $78 billion worth of U.S. government bonds being offered this week.

Though not a record amount, it is still a lot of supply to digest during a period of rapid changes in sentiment, which could result in poor demand.

"Implications for the auctions will be less demand as it seems everyone has already bought into the flight-to-quality trade over the last two weeks," said Tom di Galoma, head of fixed income rates trading at Guggenheim Partners in New York.

The 30-year long bond US30YT=RR fell nearly three points. It was last down 2-22/32, yielding 4.44 percent versus Friday's close of 4.28 percent.

(Additional reporting by Richard Leong) (Editing by Theodore d'Afflisio)