TREASURIES-Bonds slip as encouraging data pare safety bids

* Jobless, retail sales data ease some economic worries

* Long-dated yields highest in more than a week

* U.S. to hold $12 bln 10Y TIPS auction later

* U.S. to sell $69 bln 3Y, 10Y, 30Y debt next week (Updates market action after Treasury supply announcement)

By Richard Leong

NEW YORK, July 8 (Reuters) - U.S. government debt prices fell on Thursday, with long-dated yields at their highest level in more than a week, after encouraging data on jobless claims and retail sales dispelled some investor fears about a double-dip recession.

Easing worries supported bids for stocks and higher-risk assets and reduced the appeal of safe-haven bonds. But U.S. stocks faded from their initial highs after major indexes gained about 3 percent on Wednesday. [.N]

"These data are steps in the right direction," said James Caron, head of global rates research with Morgan Stanley in New York.

Bonds also succumbed to selling pressure, as investors began to make room for next week's bond supply including $69 billion in coupon-bearing Treasuries, analysts said.

The decline in bond prices may be the start of a correction to a rally that began in April, analysts say, but they cautioned any drop would be mild unless the data show a resurgence in economic growth.

First-time jobless claims fell more than expected in the latest week, while major U.S. retailers reported flat to better-than-expected results in June. For details, see [ID:nN08209499] [ID:nN07207305]

The Treasury market has advanced since April on evidence the U.S. economic recovery was slowing. Analysts say this will likely keep inflation at bay and keep the Federal Reserve from raising rates from its current zero to 0.25 percent range into the second half of 2011.

Amid uncertainties over global growth, the European Central Bank and the Bank of England left key rates unchanged at 1.0 percent and 0.5 percent, respectively, on Thursday.

U.S. benchmark 10-year Treasury notes US10YT=RR were down 11/32 in price at 104-2/32. Their yield, which moves inversely to price, was 3.02 percent, up from 2.98 percent late Wednesday.

Analysts pegged short-term chart support for 10-year yield in the 3.05 percent area, the day's session high.

The spread between two- and 10-year Treasury yields widened to 239 basis points from 236 basis points late Wednesday, reflecting slightly less worry over slowing growth. The gap between the two maturities shrank to 227 basis points a week ago, which was the narrowest since September 2009.

LOW YIELDS LIKELY TO STAY

Even though global bond yields have risen in the past 24 hours, it is not seen as likely that they will stray far from current low levels as the risks of falling prices are greater than those of rising prices, analysts said.

"It's a low, low-yielding world," said Richard Gordon, fixed-income strategist at Wells Fargo Securities in Charlotte, North Carolina. "Slow growth is being priced in and there's no inflationary pressure right now."

In this type of climate, there should be firm demand for the upcoming supply of government and investment-grade bonds.

"There is still a lot of cash in investors' hands. You have to believe the Treasury supply will be absorbed pretty well," Gordon said.

On Thursday, the U.S. Treasury Department said it will sell a combined $69 billion in longer-dated debt next week. It kicks off with a $35 billion auction of three-year notes on Monday, $1 billion less than a month earlier.

It will also hold a $21 billion, 10-year note reopening on Tuesday and a $13 billion, 30-year bond reopening on Wednesday. [ID:nWAL8IE6C4]

Furthermore, it will conduct a $12 billion auction of 10-year Treasury Inflation-Protected Securities (TIPS) at 1 p.m. EDT (1700 GMT), with data having signaled nearly no price pressure coupled with slowing demand.

In the "when-issued" market, traders expected 10-year TIPS US10TIPWI=TWEB due July 2020 to clear at 1.314 percent. The new issue is $2 billion more than the prior new offering sold in January.

In the open market, the 10-year TIPS issued in January yielded 1.27 percent US10YTIP=TWEB at midday Thursday.