TREASURIES-Gov’t debt selling may be near an end for now

* Treasuries may stabilize after weeks of selling

* Prices fall as quarter ends, large sellers rumored

* Fed’s Dudley speech on Friday may be bullish for rates
(Adds Kocherlakota comments, updates prices)

By Karen Brettell

NEW YORK, March 31 (Reuters) – U.S. Treasuries may reverse
some weakness if payroll data on Friday meets expectations and
the head of the New York Federal Reserve bank counters fears
that the Fed will quickly withdraw monetary stimulus.

Traders are focusing on employment data on Friday that some
are betting will show much higher job growth than economists’
consensus estimates for March of 190,000.

A speech by New York Fed President William Dudley is also
expected to provide a counterpoint to recent hawkish statements
by other Fed members that have weighed on Treasury yields.

“A lot of people are looking to Bill Dudley’s speech
tomorrow to be pretty bullish for the market, to offset some of
the bearish tone we’ve gotten out of some of the Fed
governors,” said Tom Tucci, head of government bond trading at
RBC Capital Markets in New York.

“That might be more important than the payroll number
tomorrow,” he added.

Minneapolis Fed President Narayana Kocherlakota said the
Central bank could raise rates by three-quarters of a
percentage point by the end of 2011, far earlier than most
investors currently expect, according to a Wall Street Journal
report on Thursday.

Traders have already priced in high expectations for
Friday’s employment data, making it less likely that a positive
number will provoke further selling.

“If they don’t get well north of 200,000, I think people
will be relieved,” said Jim Golden, head of Treasury trading at
Jefferies & Co in New York.

A two-week selloff that has sent benchmark ten-year note
yields 30 basis points higher into the quarter-end may have
exhausted bond selling for the near term.

“So many things are lining up against the market that
everyone is positioned against it, and they’ve already sold, so
there doesn’t seem to be many sellers left,” said Golden.

Treasuries weakened in various bouts of selling on
Thursday, which may have been prompted by investors tidying
books for quarter-end.

The debt saw a rapid drop in prices in midmorning, which
more than erased earlier price rises. Traders said the drop may
have been caused by a fund manager liquidating a large position
in long-dated futures and Treasury bonds.

Ten-year notes (US10YT=RR: Quote, Profile, Research) were last down 7/32 in price to
yield 3.47 percent. This debt ended the quarter little changed
and in the middle of a wide range that sent the notes as high
as 3.77 percent in February and as low as 3.14 percent earlier
this month.


The end of the Fed’s $600 billion buying program in June is
already weighing on Treasury yields, as some investors fear the
debt will need to offer more attractive returns to lure back
other buyers.

Traders also fear how fast the Fed will then move to sell
Treasury bond holdings and unwind other monetary stimulus.

With no supply, little economic data of significance and
continuing Fed buybacks next week, however, rates may stabilize
or give back some losses before starting any new leg lower.

“Longer term, inflation is moving up, the economy is doing
better, and the crises in Europe, the Middle East and Japan are
fading, though it’s still a bad situation,” said Jefferies’
Golden. “Overall there’s a pathway to higher rates going
forward, but that isn’t today or next week.”

Five-year notes (US5YT=RR: Quote, Profile, Research) fell 7/32 in price to yield 2.26
percent, up from 2.21 percent on Thursday, and 30-year bonds
(US30YT=RR: Quote, Profile, Research) dropped 2/32 in price to yield 4.51 percent, up
from 4.50 percent.
(Editing by Kenneth Barry and Diane Craft)

TREASURIES-Gov’t debt selling may be near an end for now