August 11, 2011 / 1:55 PM / 7 years ago

TREASURIES-Longer-dated U.S. debt prices fall as stocks rebound

* Stocks up over 1 percent in each of major indexes

* Treasury yield curve in temporary steepening move

* Safety bids seen in shorter Treasury maturities (Changes first paragraph, adds quotes, updates prices)

By Emily Flitter

NEW YORK, Aug 11 (Reuters) - Longer-dated U.S. Treasury prices fell on Thursday in choppy trading as bond dealers tried to prepare for a 30-year bond auction amid more worries about Europe.

Treasuries gave way to pressure from rising stocks, with the major indexes posting gains of around 1 percent each in early U.S. trading.

But market activity in stocks and Treasuries alike was still under the influence of rumors about problems with European sovereign debt and their potential solutions.

“There are still concerns over the European banking system,” said Mark McCormick, a currency strategist at Brown Brothers Harriman in New York.

“Peripheral CDS are up despite the negative turn in bond yields. I think it’s a signal that the European Central Bank is out there buying peripheral debt and supporting the bonds while people are still nervous about those countries.”

The Treasury yield curve looked steeper, with heavy selling taking place in 30-year bonds while two-year notes and three-year notes remained unchanged in price.

“It’s like a random walk here,” said Raymond Remy, a trader at Daiwa Securities in New York.

“The market’s trading very thin. There isn’t a lot of volume trading at every price, which tells me maybe we’re in summer mode here, although it doesn’t feel like we’re in summer mode. Everyone’s got their eye on the stock market.”

The 30-year Treasury bond was off more than a point in price ahead of a 1 p.m. (1700 GMT) auction by the Treasury Department of $16 billion in new 30-year bonds.

The 30-year Treasury bond US30YT=RR was last 1-9/32 lower in price and yielding 3.58 percent, up from 3.52 percent at Wednesday’s close.

The benchmark 10-year Treasury note US10YT=RR was yielding 2.20 percent, up from 2.12 percent late on Wednesday.

The currency strategist McCormick said most of the money coming out of stocks was going into shorter-dated Treasuries, not 10-year notes and bonds.

“Most of the-people are a little bit skeptical about taking duration risk right now,” he said. “A lot of the safe-haven bids are coming into the short end so you could see some steepness here.” (Editing by Chizu Nomiyama)

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