TREASURIES-Bonds up on hopes for Fed stimulus

* Some Fed officials make case for more stimulus
* Wall Street sees 70 pct chance of QE3-Reuters poll
* Europe's debt woes add to safety bids on bonds
* U.S. 10-year yield hovers near historic lows
* Analysts see strong demand for week's supply

By Richard Leong
NEW YORK, July 9 (Reuters) - U.S. Treasury debt prices rose
on Monday and benchmark yields fell, hovering just above
historic lows, on bets that the Federal Reserve will embark on
large-scale bond purchases to stimulate a sluggish U.S. economy.
Several senior Fed officials on Monday made the case the
central bank should do more to lower the unemployment rate,
which remained stuck at 8.2 percent in June.
Disappointing domestic job growth, together with Europe's
debt crisis and China's slowing business activity, have
increased speculation the U.S. central bank is preparing to
embark on a third round of quantitative easing to spur borrowing
and demand, analysts said.
"Economic momentum is trending lower," said Sharon Stark,
chief fixed income strategist at Sterne Agee & Leach in
Birmingham, Alabama. "Traders are preparing for another round of
quantitative easing after three straight months of
below-consensus jobs growth."
Wall Street economists see a 70 percent chance the Fed will
engage in a third round of quantiative easing, nicknamed QE3,
according to a Reuters poll conducted shortly after the June
payrolls report on Friday.
The U.S. Labor Department said on Friday U.S. employers
added 80,000 jobs in June, below the 90,000 predicted by
economists polled by Reuters.
San Francisco Fed President John Williams said, "We stand
ready to do what is necessary to attain our goals of maximum
employment and price stability."
With renewed appetite for bonds, the Treasury is expected to
benefit from strong demand for $66 billion in sales of new
coupon-bearing debt this week, analysts said.
The Treasury will sell $32 billion in three-year notes
on Tuesday; $21 billion in 10-year debt on
Wednesday and $13 billion in 30-year bonds on
Thursday.
Benchmark 10-year U.S. Treasury notes last
traded up 12/32 in price for a yield of 1.52 percent, down 3
basis points from late on Friday.
The 10-year yield is about 8 basis points above the level
set on June 1, which was the lowest going back to the early
1800s, according to data gathered by Reuters.
Thirty-year bonds rose 1-2/32 to yield 2.62
percent, down 4 basis points from Friday's close. The 30-year
yield was hovering at its lowest level in about a month and 11
basis points above its record low set in early June in reaction
to poor May jobs data.

WATCHING FOR FURTHER WEAKNESS
While jobs growth has slowed in recent months, however, some
investors reckoned economic conditions had not yet deteriorated
enough for the Fed to begin buying more Treasuries or
mortgage-backed securities.
"It's not weak enough yet for the Fed to come in," said
Chris Orndorff, senior portfolio manager at Western Asset
Management Co. in Pasadena, California, which manages $447
billion in assets. "They have to save some ammunition for
Europe."
The protracted struggle for Spain and Greece to manage their
debt has rekindled investors' push into U.S. and German
government debt that are perceived as safer investments.

"Europe is giving people another reason to buy bonds," Stark
said. "More and more money will flow into the U.S. bond market."
In Asia, China's inflation also slowed more than expected in
June, suggesting demand for its goods from Europe and the United
States was falling.