TREASURIES-T-notes slip as euro zone mood brightens

LONDON, Sept 4 (Reuters) - U.S. bond prices fell on Tuesday
along with other safe-haven assets after the European Central
Bank hinted at the scope of its bond-buying plans, boosting risk
appetite.

* Lower rated assets including Spanish and Italian bonds
rallied after ECB President Mario Draghi was quoted telling
lawmakers that ECB purchases of bonds with up to three-year
maturities would not breach the European Union's taboo of
directly financing economies.

* T-note futures fell 5/32 to 134-19/32, also
catching up with a fall seen in Europe on Monday when U.S
markets were closed.

* "Peripherals (in Europe) are doing a little better so it
seems risk assets are outperforming at the cost of core," a
trader said.

* But losses were expected to be limited after Treasuries
rallied sharply on Friday when U.S. Federal Reserve Chairman Ben
Bernanke buoyed expectations of a new round of bond-buying
stimulus for the country's struggling economy.

* Economic data this week was expected to be key to whether
those expectations gained traction and provided momentum for a
fresh T-note rally.

* The U.S. Institute of Supply Management manufacturing
survey is forecast to show a small improvement, but the main
focus will fall on Friday's non-farm payrolls report after
Bernanke explicitly expressed concerns over the labour market.

* "The Fed is clearly very concerned about the labour
market, hence the importance of Friday's data. If we did see a
downward surprise, then the markets would increase their bets of
QE," said Nick Stamenkovic, strategist at RIA Capital Markets.