TREASURIES-Yields near 10-month high before new note supply
* Yields rise before $24 bln 10-yr note sale * 10-year notes test technical support levels * Treasuries temporarily pare price losses on retail sales data By Karen Brettell NEW YORK, Feb 13 (Reuters) - U.S. Treasury debt yields rose to near a 10-month high on Wednesday, with benchmark notes testing technical support levels that, if broken, could spark a larger selloff as banks and investors prepared to absorb new supply of 10-year notes. The Treasury will sell $24 billion in 10-year notes Wednesday in the second round of $72 billion in new coupon supply this week. It will sell $16 billion in 30-year bonds Thursday, and sold $32 billion of three-year notes on Tuesday. Preparation for Wednesday's auction helped send 10-year note yields as high as to 2.03 percent on Wednesday, at the upper end of their recent trading range. Benchmark yields reached to 2.06 percent early last week, marking the highest since mid-April. "We are at pretty critical juncture, I think it's going to be important for the market to hold these levels on a short-term basis," said Greg Faranello, a Treasuries trader at Societe Generale in New York. If the 10-year notes yields hold a break above the 2.03 percent to 2.06 percent level, then technical analysis suggests the debt's yields may next increase to the 2.20 percent area. Traders expect the new debt to price at around a yield of 2.04 percent, according to trading in the "when-issued" market. Benchmark 10-year notes were last down 9/32 in price to yield 2.02 percent, up from 1.98 percent late on Tuesday. The debt briefly pared price losses after data earlier on Wednesday showed little growth in consumer spending in January. U.S. retail sales barely rose in the month as tax increases and higher gasoline prices restrained spending. "The report shows that the economy continues to grow at a modest pace, but the recovery is far from robust," said Eric Stein, a portfolio manager at Eaton Vance in Boston. Investors are now focused on a package of automatic spending cuts due to kick in on March 1, unless lawmakers agree on alternative budget measures or delay negotiations to a later date. The White House has said that cuts will harm economic growth, though many lawmakers say reduced spending is necessary to stabilize the country's rising debt load. Some analysts expect Treasury yields to fall in the weeks heading into the debate deadline as investors adjust for the likely impact of the spending cuts on the economy. The Federal Reserve bought $1.45 billion in bonds due from 2036 to 2042 on Wednesday as part of its ongoing bond purchase program. It will also purchase between $4.75 billion and $5.75 billion in debt due from 2017 to 2018 on Thursday.
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