TREASURIES-Bonds recover on weakness in stocks, strong auction

* Strong 3-year notes sale fuels further gains

* Worries over Europe, fall in stocks revive safe-haven bid

* Rethink about fleeting U.S. jobs relief
(Updates after auction, adds quote, latest prices)

By Burton Frierson

NEW YORK, Sept 7 (BestGrowthStock) – Treasuries rebounded on
Tuesday after three straight losing sessions, as waning
confidence in the U.S. stock market and a strong auction of
three-year notes gave the market a lift.

Investors were reassessing their initial relief about the
latest U.S. monthly jobs report on Friday, which was less grim
than expected. Resurgent worries over the euro zone’s financial
health also enhanced the allure of safe-haven bonds.

A well-received auction of $33 billion worth of three-year
Treasuries, the first of this week’s three bond offerings
totaling $67 billion, added to the bond-positive sentiment.

The sale attracted bids worth 3.21 times the amount on
offer, right on their six-month average. Yields at the auction
came in slightly below expectations, indicating that investors
were willing to pay a small premium to get hold of the bonds.

“There is a lot of cash in the system. There is a lot of
demand at the front end,” said Joe Larizza, director of
governments and agencies trading in Vining Sparks in Memphis.

“You had a lot concerns about European stress tests, and
that put a run back into the Treasuries market,” Larizza said.
“This sets up a positive tone for the rest of the week. We are
looking at continued strength going into the auctions.”

The benchmark 10-year note (US10YT=RR: ) was last up 21/32 in
price, yielding 2.63 percent versus Friday’s close of 2.70
percent.

A report on the European banking system reawakened fears
about the region’s financial health. A Wall Street Journal
report raised questions about bank stress tests carried out in
the euro zone earlier in the year.

Separately, Germany’s banking association said the
country’s 10 biggest banks may need 105 billion euros ($141
billion) of additional capital under a revamp of banking rules
designed to prevent future financial crises, which weighed on
financial shares. For details see [ID:nLDE6850Q9] and [.N]
(Additional reporting by Richard Leong and John Parry;
Editing by Padraic Cassidy)

TREASURIES-Bonds recover on weakness in stocks, strong auction