* Focus stays on developments in Gaza, Iraq and Ukraine
* U.S. 3-year note supply set to sell at lowest yield in 4
* Low German Bund yields offset domestic supply pressure
By Richard Leong
NEW YORK, Aug 12 U.S. Treasury debt yields
inched higher on Tuesday as traders sold some bond holdings in
advance of a $27 billion auction of three-year notes, part of
this week's $67 billion quarterly government refunding.
The selling pressure from this week's bond supply has been
offset by a steady bid for safe-haven Treasuries on worries
about conflicts in Iraq, eastern Ukraine and Gaza. Benchmark
10-year yields have lingered not far from last week's 14-month
low of 2.349 percent.
"The U.S. bond market has been driven a lot by external and
geopolitical factors rather than improving domestic data," said
Robert Tipp, chief investment strategist at Prudential Fixed
Income in Newark, New Jersey.
Tension remained high in Iraq as its prime minister Nuri
al-Maliki refused to step down after his replacement was named.
Israelis and Palestinians, amid a 72-hour truce, have not
reached a deal to end their month-old war in Gaza.
Fears that a Russian aid convoy to Ukraine could become a
pretext for an invasion into eastern Ukraine, where government
forces are closing in on pro-Russian rebels, knocked a closely
watched gauge on German investor and analyst sentiment to its
lowest level in more than 1-1/2 years in August.
The index decline supported the view the European Central
Bank would act aggressively soon to help the fragile euro zone
economy, pushing 10-year German Bund yields near their record
low set last week.
The rockbottom Bunds yields helped to keep a lid on the rise
in Treasuries yields despite encouraging domestic data on jobs
and business activity, analysts said.
On low volume in early U.S. trading, benchmark 10-year
Treasuries yields were last at 2.424 percent, up
about half a basis point from late Monday, while the 30-year
bond yield rose nearly 1 basis point to 3.242
In the "when-issued" market, the upcoming three-year note
issue due August 2017 was quoted to sell at a yield of 0.9160
percent, which would be the lowest yield in four
After the three-year note sale at 1 p.m. (1700 GMT), the
Treasury Department will sell $24 billion in 10-year notes on
Wednesday and $16 billion of 30-year bonds on
At 11 a.m. (1500 GMT), the Federal Reserve will buy $950
million to $1.15 billion in bonds due in 2036 to 2044, as a part
of its bond purchase program that is expected to wind down in
(Reporting by Richard Leong; Editing by Chizu Nomiyama)