TREASURIES-Equity strength dents appetite for safe T-notes

LONDON, March 6 Wed Mar 6, 2013 7:13am EST

LONDON, March 6 (Reuters) - U.S. Treasury yields rose on Wednesday as a recent stock rally dented appetite for safe-haven assets, with market players also positioning for a higher-than-forecast jobs number on Friday.

Ten-year U.S. Treasury yields rose 2.1 basis points to 1.92 percent, but traders said bond prices have held up reasonably well as U.S. stock markets hit new highs and with recent data from the world's largest economy broadly upbeat.

U.S. stock index futures pointed to fresh gains on Wall Street, after the Dow Jones Industrial Average hit historic highs this week.

"The fundamentals (point) towards higher yields, yet bond markets are doing well," said Craig Collins, trader at Bank of Montreal.

He said U.S. Treasury markets remained underpinned thanks to conditions outside the United States, including expectations for slower growth in Europe and political uncertainty in Italy.

An inconclusive vote in the euro zone's third largest economy has led to worries financial market instability could resume, but Italian debt prices were bid this session.

Markets also positioned for non-farm payrolls data on Friday, traders said.

Even though a Reuters poll indicated economists were expecting only a mild improvement in job creation last month to 160,000 from January's 157,000, traders said markets were preparing for a potentially higher number.

"I think the market is probably looking for a 175,000 to 200,000 print. I think people are expecting non-farms to be higher and people are setting up shorts," a second trader said.

The first trader expected payrolls to come in at between 160,000 and 185,000.

"All the data has been uniformly positive so we will probably have a nice number," he added.

Five-year U.S. Treasury yields edged 1.4 basis points higher to 0.79 percent and 30-year yields rose 2.4 bps to 3.13 percent.

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