* US $62 bln supply in focus this week
* US 10-year yields now higher than Spain's
By Gertrude Chavez-Dreyfuss
NEW YORK, June 9 Prices for U.S. Treasuries fell
on Monday, pressured by a $62 billion sale of new coupon-bearing
government debt this week and increased risk appetite following
a strong U.S. jobs report last Friday.
Yields on U.S. long-term securities rose for a second
straight day, helped by easing tensions between Russia and
Ukraine and Russia will hold talks on Monday to avert a gas
war, a welcome sign that both countries are at least willing to
talk. The meeting is meant to prevent supply disruptions and
eventually take the heat out of the conflict in eastern Ukraine.
U.S. bond supply, however, remained the focus of the week,
with the $62 billion Treasury coupon auctions, beginning with
Tuesday's $28 billion three-year note sale. That will be
followed by the sale of $21 bln in 10-year notes on Wednesday,
and $13 billion in 30-year bonds.
"Some of today's weakness is just prepping for the auction
that's coming this week," said David Keeble, global head of
interest rates strategy at Credit Agricole in New York.
"It's the long ones on auction, so you've got to put
duration in the market and we're doing it now without much help
from Federal Reserve purchases that we've had before."
Benchmark 10-year notes were last down 7/32 in
price to yield 2.622 percent, from 2.591 percent late on Friday.
For the first time since April 2010, Spanish 10-year yields
fell below those of U.S. Treasuries. Spanish yields hit historic
lows of 2.584 percent.
Italian five-year yields were also below U.S. equivalents,
highlighting the policy divergence between the European Central
Bank, which has launched further stimulus, and the Fed, which
has been reducing its asset purchases.
The impending end of the Fed's quantitative easing has been
helped by upbeat U.S. non-farm payrolls, which increased by
217,000 last month, returning employment to its pre-recession
U.S. five year note prices were down 5/32 to yield 1.687
U.S. 30-year bonds fell 12/32 in price to yield 3.457
percent, from 3.432 percent late on Friday.
There's also a broad risk-on feel to the market, analysts
"A spillover from Friday's good jobs report makes some sense
and you could also say that some of the news from Russia/Ukraine
has been a bit better, that they are finally seeming to talk to
each other," said Credit Agricole's Keeble.
(Editing by Nick Zieminski)