Treasuries under pressure in Europe as stocks rally

(Reuters) - Treasuries fell in Europe as U.S. President-elect Barack Obama's plans for $310 billion in tax cuts gave further support to regional stock markets and dampened demand for safe-haven government debt.

Highlights:

* The plan is the latest in a series of measures aimed at tackling a financial crisis that began with U.S. mortgage defaults in 2007 and has now plunged major economies into recession, reshaped the banking landscape and taken entire countries to the brink of bankruptcy.

* European shares traded higher, buoyed by a jump in U.S. shares on Friday. However equity futures pointed to a more mixed start on Wall Street later on Monday.

* At 1003 GMT (5:03 a.m. EST), benchmark T-note yields were 9 basis points higher at 2.4525 percent, with two-year notes yielding 0.8551 percent, 2.8 basis points higher. March T-note futures were 6/32 lower at 124-4/32.

* Still, the 10-year note's yield remained within sight of the five-decade low of 2.04 percent struck last month on a flight-to-quality rally driven by the global financial crisis.

* Meanwhile, San Francisco Federal Reserve Bank President Janet Yellen said the Fed is prepared to expand its unconventional policy measures and Chicago Fed President Charles Evans said there was a need for the Fed to step up quantitative easing measures, the prospect of which has supported bond markets in recent weeks.

* "The likelihood of a major improvement in the macro outlook does look rather remote. However, in the market sense this is not new news and for bond markets in particular the key question is the extent to which these factors are already priced in," said Nomura rate strategist Sean Maloney.

"Indeed with yields still near to record lows the case could be made that there could be a more heightened sensitivity to any upside surprises."

* The closely watched U.S. employment report will be released on Friday and is expected to show 485,000 job losses in December, according to economists' consensus forecast. Prospects of the U.S. economy sinking deeper into recession will remain bond-supportive in the long term, but analysts say this is a factor that has to be balanced with the negative aspects of increased debt issuance.

* The U.S. government is expected to issue between $1.5 trillion and $2 trillion of debt in 2009 to pay for its massive financial system rescue efforts and the market will face its first note auctions of the year at a three-year offering on Wednesday and a 10-year tender on Thursday.