TREASURIES-Yields slip as August price reductions draw buyers

* Higher yields draw buyers in thin pre-weekend trading
* Bernanke's Jackson Hole speech next market focus

By Ellen Freilich
NEW YORK, Aug 17 (Reuters) - Yields on U.S. Treasuries debt
edged down from three-month highs on Friday as price cuts and
higher yields built in during the first half of August attracted
some buyers.
But yields remained near three-month highs as improved
economic data has damped expectations that the Federal Reserve
will announce a third round of quantitative easing in September.
Some believe the U.S. central bank will await further data on
the economy.
At the same time, worries over Europe's debt crisis have
calmed somewhat over recent weeks, easing demand for safe-haven
debt.
"The flight-to-quality buying that drove yields down has
diminished, which let yields rise quite a bit over the past few
weeks, and traders and investors have taken more interest in
Treasuries at these higher yields," said Gary Thayer, chief
macro strategist at Wells Fargo Advisors in St. Louis, Missouri.
In addition, "the market's expectations are not quite as
high for quantitative easing as they were a couple of weeks ago
when the economic data looked softer than it does now," he said.
Treasuries did not react to data on Friday showing U.S.
consumer sentiment improved in early August. A gauge of future
U.S. economic activity improved in July, but still pointed to
sluggish growth ahead.
Despite the dramatic sell-off over the past month, some see
Treasuries as likely to remain well bid, because of their appeal
as one of the safest investments available.
"The lack of safe collateral hasn't changed," said Lou
Brien, market strategist at DRW Trading in Chicago. "We'll
fluctuate up and down, but I don't think we've seen the end of
the bond market (rally) by any stretch."
Traders said thin volume as many traders take summer
vacations has exacerbated moves in Treasuries price and yields.
Mortgage servicers adjusting the Treasuries they hold as
hedges in their portfolios may have also added to the recent
sell-off, they said.
The next focus for the markets will be Fed Chairman Ben
Bernanke's highly anticipated speech at the central bank's
annual conference in Jackson Hole, Wyoming, at the end of this
month.
Investors will be watching for any hints about the central
bank's plans for its next policy meeting, in September.
"People still anticipate there could be something in
Bernanke's Jackson Hole talk even if expectations for more
monetary easing have diminished somewhat," Thayer said.
Another key event will be the European Central Bank's
September meeting. Investors are expecting the ECB to outline
steps, including bond purchases, that it will take to stem the
spreading debt crisis in the euro zone.
Benchmark 10-year note yields on Friday traded
at 1.82 percent, up from a record low 1.38 percent on July 25.
The notes have tested resistance at around 1.86 percent in
recent days, just below their 200-day moving average, as foreign
investors sold bonds in overnight sessions.