TREASURIES-Bonds slip in Asian trade before 5-year note sale

* Trader caution heading into $35 bln 5Y debt auction

* Stock gains curb safe haven bids for bonds

* Remarks by Fed officials also pressure Treasurys

By Richard Leong

HONG KONG, March 29 (Reuters) – U.S. Treasury prices fell in Asian trading
on Tuesday on traders’ caution over the appetite for $35 billion of new
five-year debt after tepid results at a two-year note auction.

* Bargain-hunting ignited a rebound in global equity markets and curbed
safety bids for bonds. Stocks fell earlier in the wake of Monday’s losses on
Wall Street and news that plutonium was found in soil at the earthquake-stricken
Fukushima nuclear plant in Japan. For more, see [ID:nL3E7ES2ND]

* Also pressuring Treasuries were recent comments from a couple of U.S.
central bank officials known for their tough inflation view. Their perceived
hawkish remarks increased bets that the Federal Reserve would raise short-term
interest rates earlier than previously thought.

* Still the combination of Japan’s nuclear crisis, the fighting in Libya and
Europe’s festering public debt woes has kept benchmark Treasury yields from
rising above their psychological support of 3.50 percent.

* Trading volume has been light in advance the end of the first quarter and
the end of Japan’s fiscal year on Thursday and the government’s March figures on
U.S. payrolls on Friday. Some analysts blamed the reduced participant on the
weaker-than-expected two-year Treasury auction on Monday.

* Analysts predicted stronger demand for the latest five-year issue, part of
this week’s $99 billion in longer-dated supply. In the “when-issue” sector,
traders expected the U.S. Treasury Department would sell the five-year issue due
March 2016 at a yield of 2.22 percent. This would be the highest
clearing yield on new five-year Treasuries since April 2010. The five-year
auction results will be released shortly after 1 p.m. EDT (1700 GMT).

* “Many in the market are expecting a better performance from 5s as yield
have backed up significantly following the safety trade seen two weeks ago,”
Gennadiy Goldberg, fixed income analyst at 4Cast Inc., wrote in a research note.
“There are certainly some tailwinds for the sale, namely the approaching
quarter-end potentially helping some duration extension and end-of-quarter
buying.”

* Public appearances by U.S. Fed officials slow on Tuesday. St. Louis Fed
President James Bullard will speak about U.S. monetary policy in Prague at 0500
EDT (0900 GMT). For more, see

* On the U.S. data front, there will be figures on weekly chain-store sales,
S&P/Case-Shiller home prices and Conference Board’s consumer confidence survey.
These reports are not expected to be market-movers.

* U.S. bonds have settled into a tight trading range at levels prior to the
Japan quake and tsunami. Benchmark 10-year cash Treasury notes were down 4/32 in
price to yield 3.44 percent, up 1 basis point from Monday and 30 basis points
above the three-month low of 3.14 percent touched on March 16.

* June 10-year T-note futures (TYv1: Quote, Profile, Research) were up 2/32 at 119-4/32, catching up
with a late uptick in the cash market after the futures market settled on
Monday. June T-notes held above the 119 chart support for a third day.

* The MSCI Asia-Pacific ex-Japan index finished up 0.43
percent, while Japan’s benchmark Nikkei average ended down 0.21 percent,
paring an earlier 1.5 percent drop. As for U.S. shares, S&P e-mini futures
(ESc1: Quote, Profile, Research) were up 0.38 percent.

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(Reporting by Richard Leong)

TREASURIES-Bonds slip in Asian trade before 5-year note sale