TREASURIES-Long-dated debt falls on data, supply concerns
* Treasury to sell $8 bln in 10-year inflation securities
* Stronger-than-expected ISM services data hits long end
* Fed buys $7 bln debt maturing in 4 to 7 years (Updates market action after Fed purchase)
NEW YORK, July 6 (Reuters) - Longer-maturity U.S. Treasury debt prices fell on Monday on supply concerns and a stronger-than-expected report on U.S. services industries that rekindled hopes of an economic rebound later this year.
Short-dated government notes were mostly unchanged in the wake of surprisingly weak jobs data last Thursday. The data supported the notion the Federal Reserve will leave its near zero interest rate policy unchanged in the foreseeable future in a bid to end the recession.
A return to economic growth, together with massive government borrowing, would exert upward pressure on inflation and erode the value of long-dated Treasuries.
"The long end lagged the move as the Street used the steepening move as an assist in helping them to set up for this week's long-end supply," said Marty Mitchell, head of government bond trading at Stifel Nicolaus & Co. in Baltimore.
This week's Treasury coupon supply of $73 billion kicks off with an $8 billion auction of 10-year Treasury Inflation-Protected Securities (TIPS) later Monday.
The TIPS auction will be followed by a $35 billion sale of new three-year notes on Tuesday; a $19 billion auction of older 10-year debt on Wednesday; and an $11 billion re-opening of 30-year bonds on Thursday.
Given the Fed's tame outlook on prices, it is unclear what the demand will be for bonds that offer inflation protection.
"Again it's not inflation but real rates (too low) and nominal rates (too high) that are mispriced given how much slack we have," George Goncalves, head of fixed income rates strategy at Cantor Fitzgerald, wrote in a research note.
Benchmark 10-year Treasury notes US10YT=RR were down 8/32 in price at 96-20/32. Their yield, which moves inversely to the price, was 3.53 percent, up from 3.50 percent on Thursday and below an eight-month high of 4.00 percent hit last month.
Two-year Treasury notes US2YT=RR were up 2/32 for a yield of 0.95 percent, down 4 basis points from late Thursday.
The U.S. bond market was closed on Friday in observance of the U.S. Independence Day holiday.
LESS DETERIORATION Continued...
