* Cyprus concerns fade, paring safety bids for bonds
* Solid data support view of slow, steady U.S. growth
* Sturdy demand seen for $35 bln in two-year note supply
* U.S. Fed to buy $2.75 bln-$3.50 bln in government debt
By Richard Leong
NEW YORK, March 26 U.S. government debt prices
fell on Tuesday as traders trimmed their bond holdings amid
reduced anxiety over Cyprus' banking woes ahead of a $35 billion
auction of two-year note supply.
The latest data on domestic home prices and durable goods
orders supported a notion that the U.S. economic recovery
remained on track, but steeper-than-expected drops in consumer
confidence and new home sales undercut hopes that the pace of
growth was accelerating.
"It's a combination of different things. The immediate
threat from Cyprus has faded. The data have been pretty solid,"
said John Brady, managing director of interest rate futures
sales at R.J. O'Brien & Associates in Chicago.
Benchmark 10-year yields retraced from their
two-week lows set last week on diminished fears over Cyprus'
banking system since the island nation obtained a 10 billion
euro ($13 billion) international bailout this past weekend.
Ten-year yields, however, have stayed below 2 percent on
some safe-haven demand for bonds in the wake of comments from
Jeroen Dijsselbloem, the head of the Eurogroup of finance
ministers, who said on Monday that a Cypriot bailout - which
wiped out some senior bank bondholders and will impose big
losses on large depositors - will serve as a model for resolving
euro zone banking problems.
He later appeared to backtrack, saying Cyprus was a specific
case with exceptional challenges including vast deposits from
Russian overseas investors, but analysts said this "bail-in"
solution, which would hurt investors and savers, could cause a
possible bank run across the euro zone.
The latest flare-up in the festering euro zone debt crisis,
together with the Federal Reserve's commitment to hold down
interest rates, should feed bids at the two-year auction at 1:00
p.m. (1700 GMT), part of this week's $99 billion in regular
coupon-bearing supply, analysts said.
In the when-issued market, traders expected the upcoming
two-year note supply to yield 0.2630 percent,
higher than the 0.257 percent yield on the two-year issue sold
at the February refunding.
On the open market, the 10-year Treasury note
last traded down 3/32 in price for a yield of 1.928 percent, up
0.8 basis points from late on Monday.
The 30-year bond was 4/32 lower in price,
yielding 3.151 percent, up half a basis point from Monday's
The U.S. central bank planned to buy $2.75 billion to $3.50
billion in Treasuries due in May 2020 to Feb. 2023 at 11:00 a.m.
(1500 GMT), which is part of its ongoing bond purchases in a bid
to hold down long-term interest rates to help the economy.