TREASURIES-Steady rate outlook favors short end

* Short end draws support from stable Fed outlook

* Long-dated Treasuries underperform short end

* Upcoming supply, technical selling weigh on long end

* Productivity gain argues for low inflation (Updates prices, adds comment)

By Ellen Freilich

NEW YORK, Nov 5 (Reuters) - Big gains in U.S. workers' productivity in the third quarter supported short-dated U.S. government securities prices on Thursday, while upcoming supply weighed on long-dated debt.

Meanwhile, data showing a drop in new U.S. claims for jobless benefits, plus the productivity gains which promised better corporate profits, pushed stocks higher. That also depleted the bid for safe-haven U.S. government debt as investors showed a willingness to shoulder riskier assets.

"The third-quarter productivity gains would limit inflation concerns to some degree, which in this environment is probably more important for what it means for Federal Reserve policy, so it is helping to support the front end," said John Canavan, analyst at Stone & McCarthy Research Associates in Princeton, New Jersey.

The Fed -- the U.S. central bank -- said on Wednesday it would hold benchmark interest rates steady near zero and reiterated rates would remain low for an "extended" period.

At the same time, "positioning before next week's refunding weighs on 10s and bonds especially heavily," Canavan said.

The Treasury will auction $40 billion in three-year notes, $25 billion in 10-year notes, and $16 billion in 30-year bonds next Monday, Tuesday and Thursday, respectively.

Technical pressures contributed to the market brew.

"The long bond yield popped above the 4.37 percent to 4.38 percent area which had held fast since last August," Canavan said. "An attempt to get back through that area this morning failed, adding some technical selling pressure to the mix."

Thirty-year bonds US30YT=RR were down 7/32 in price, their yields rising to 4.42 percent from 4.40 percent late Wednesday. Benchmark 10-year notes US10YT=RR were down 2/32 to yield 3.54 percent, up from 3.53 percent.

"The Fed's emphasis on low interest rates and the supply dynamic led to duration sales," said Jefferies & Co chief fixed-income technical strategist John Spinello in New York.

In contrast, two-year Treasury notes US2YT=RR yields, which are more sensitive to expectations of changes in the federal funds rate, eased to 0.89 percent from 0.91 percent late on Wednesday. Five-year notes rose 4/32, their yields easing to 2.35 percent from 2.38 percent on Wednesday.