* Focus stays on developments in Gaza, Iraq and Ukraine
* U.S. 3-year note supply sells at lowest yield in 4 months
* U.S. 10-year debt poised for lowest yield since June 2013
* Low German Bund yields offset domestic supply pressure
(Updates market action, adds quote)
By Richard Leong
NEW YORK, Aug 12 U.S. Treasury debt yields rose
on Tuesday as traders sold some bond holdings in advance of a
combined $40 billion in longer-dated supply, which some traders
worry might not lure strong demand due to their low yields.
Wednesday's auction of $24 billion in 10-year notes and
Thursday's $16 billion sale of 30-year securities follow solid
results at the $27 billion three-year note auction.
"Heading into tomorrow and Thursday, this is the time for a
set-up for longer-dated supply," said Stanley Sun, interest rate
strategist at Nomura Securities International in New York.
In the "when-issued" market, the upcoming 10-year note issue
due August 2024 was quoted to sell at a yield of 2.460 percent
, which would be the lowest since June 2013.
Earlier, the three-year note sale fetched a yield of 0.924
percent, which was the lowest in four months.
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 trading volume, benchmark 10-year Treasuries yields
were last at 2.444 percent, up 2.4 basis points from
late Monday, while the 30-year bond yield rose 3.5
basis points to 3.268 percent.
Separately, the Federal Reserve bought $1.09 billion in
Treasuries due in 2039 to 2043, the latest for its bond purchase
program that is expected to wind down in October.
(Reporting by Richard Leong; Editing by Chizu Nomiyama)