* Treasuries give up gains after bullish services data
* Money flows seen steered by Treasury auction strategies
* Traders ready for Yellen testimony later in week
(Updates with latest prices, comments)
By Michael Connor
NEW YORK, May 5 U.S. Treasuries fell on Monday
after economic data signaled unexpectedly strong growth in the
U.S. services sector, surrendering early gains made on a flight
to safety spurred by tensions in Ukraine.
Prices for 10-year notes were down 7/32, the
first decline in five trading sessions, and were yielding 2.613
On Friday, the issue yielded as little as 2.57 percent, a
three-month trough. Yields on Monday ahead of the Institute for
Supply Management data release on the services sector had been
near Friday's low.
On Friday, when an unexpectedly strong U.S. payrolls report
was undermined by worries about Ukraine, U.S. 30-year bond
yields fell as low as 3.34 percent, their lowest
level since June 19. But prices retreated 28/32 on Monday and
lifted yields to 3.409 percent in New York.
Shorter Treasury issues were flat or little changed in slow
early afternoon trading, which was dulled by market holidays in
Tokyo and London.
Much trading was driven by positioning by traders ahead of
Treasury Department auctions of new debt scheduled for later
this week, according to Mary Beth Fisher, head of U.S. interest
rates strategy at SG Corporate & Investment Banking.
"We haven't seen a lot of heavy money flows," Fisher said.
"But we see people setting up positions going into the auctions.
We think all three auctions will go well."
Beginning with a sale on Tuesday of three-year notes, the
Treasury will also hold an auction for 10-year notes on
Wednesday and another for 30-year bonds on Thursday.
Treasuries had been up earlier on Monday after pro-Russian
militants stormed a Ukrainian police station in Odessa on Sunday
and freed nearly 70 fellow activists. Pro-Russian rebels shot
down a Ukrainian helicopter on Monday.
European stocks were stung by the news, as well as by
economic data signaling China's growth was slowing, and slipped
in thin trade. Wall Street stocks opened lower, with major
indexes off about 0.5 percent, but recovered and rose on
optimism generated by the services sector data.
Traders were also readying for testimony before the U.S.
Congress on Wednesday and Thursday by Federal Reserve Chair
Janet Yellen that may provide clues on what's next for the
central bank's massive bond-buying program and on the timing of
the interest rate hikes widely expected next year.
"Yellen will be key," Raymond James market strategist Ellis
Phifer said. "She has moved markets at other times she's
Yellen will make few waves that will affect trading
substantially, according to U.S. strategist Gennadiy Goldberg at
"Yellen likely (will strike) a relatively dovish tone while
maintaining an optimistic outlook on the recovery amid recent
signs of improvement," Goldberg said.
"Yellen will likely attempt to downplay any suggestions that
the Fed would hike faster than anticipated following last week's
stronger payroll report, stressing that substantial slack in the
economy and contained price pressures will leave the Fed on hold
for some time to come," he said in a written commentary.
(Reporting By Michael Connor in New York; Editing by Chizu
Nomiyama and Peter Galloway)