TREASURIES-U.S. bonds fall in Europe before 10-year debt sale

LONDON Wed Jan 9, 2013 5:10am EST

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LONDON Jan 9 (Reuters) - U.S. government bonds fell in Europe on Wednesday as investors made room in their books for upcoming supply of a combined $34 billion of 10- and 30-year paper.

* The Treasury will sell $21 billion in 10-year notes on Wednesday and $13 billion in 30-year bonds on Thursday. A German auction of five-year bonds was also contributing to broad pressure on safe-haven debt.

* A sale of $32 billion of three-year notes on Tuesday saw strong non-dealer bidding. The high yield was 0.385 percent, in line with expectations.

* Benchmark 10-year T-note yields were 1.9 basis points higher on the day at 1.8833 percent, while 30-year yields rose 2.1 bps to 3.0863 percent.

* "With supply coming on the horizon in both Treasuries and Germany, it seems like the market is cheapening up here," said Craig Collins, a trader at Bank of Montreal, adding the next move in yields depends on how supply is absorbed.

* "The 10-year note is in an OK shape ... but the long bond tomorrow is more of a wild card, a little tougher to digest in this environment. If it goes poorly tomorrow I think 2 percent (in 10-year) yields becomes a legitimate target," Collins said

* T-note yields hit 8-month highs of 1.9750 percent last week on the back of a last-minute deal to avert a fiscal crisis in the U.S. and some better-than-expected economic data out of the world's top economy. The U.S. market stabilised this week as some investors snapped up the cheapened paper.

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