UPDATE 2-Citigroup's CDS spreads widen on new bond issue

(Adds size and pricing for Citigroup's bond)

NEW YORK, Aug 12 (Reuters) - The cost of insuring Citigroup's (C.N) debt with credit default swaps rose on Tuesday after the largest U.S. bank surfaced with a new $3 billion corporate bond offering.

Five-year credit default swaps on Citigroup widened to 158 basis points, or $158,000 a year to protect $10 million of debt, from 145 basis points before the bond deal was announced, according to Phoenix Partners Group.

Citigroup sold $3 billion in five-year senior notes at a yield spread of 337.5 basis points over Treasuries, with pricing expected soon, according to International Financing Review, a Thomson Reuters publication.

Those spreads are wider than Citigroup paid in April, when it sold $4.5 billion of five-year notes at 300 basis points over Treasuries.

Since then, deteriorating capital markets and a slumping economy have triggered massive write-downs at the bank. On July 18, it posted a $2.5 billion second-quarter loss, smaller than the market expected, amid $11.7 billion of write-downs and losses.

Citigroup's 5.5 percent bond due 2013 widened 31 basis points in secondary trading to 312 basis points over Treasuries, according to MarketAxess. (Reporting by Dena Aubin and Karen Brettell, Editing by Leslie Adler)