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TREASURIES-Bond prices rise as global growth fears come to fore

Tuesday, 9 Oct 2012 | 3:01 PM ET

* Growth, Greece worries stoke safety bids for bonds

* U.S. sells $32 bln in 3-year note supply

* Fed buys $1.89 billion in long-dated debt

* Long bond yield dips below 200-day moving average

(Updates on 30-year bonds) By Richard Leong

NEW YORK, Oct 9 (Reuters) - U.S. Treasuries prices advanced on Tuesday as investors, worried about bleak views of global growth and the upcoming earnings season, dumped riskier assets to pour money into safe havens.

The International Monetary Fund, one of Greece's main lenders, said in a report on Tuesday that Athens would miss the five-year debt reduction target that is a condition for the country's 130 billion euro bailout.

The group also warned the United States faces meager growth of about 2.0 percent this year and in 2013 and predicted a 0.4 percent contraction in the euro zone this year. It also downgraded its outlook on China, the world's second-largest economy.

The IMF outlook "was adding to the downbeat sentiment. It was a confirmation of slow growth globally," said Gennadiy Goldberg, an interest rate strategist with TD Securities in New York. "That's why we are setting back into this trading range."

Key U.S. stock indexes also dropped as investors awaited what many fear could be a disappointing earnings season.

"Earnings season is under way, and it does not bode to be particularly good," said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut.

"I'd like to see whether that takes the edge off stocks and other risk assets," he added.

Thomson Reuters data through Friday showed 90 companies in the S&P 500 have lowered outlooks versus 21 raised outlooks. The resulting ratio of negative to positive outlooks of 4.3 is the weakest showing since the third quarter of 2001.

The concerns about Greece and global growth overshadowed Friday's government report that the U.S. jobless rate fell in September to 7.8 percent, the lowest level since January 2009. The lower jobless rate and other surprisingly upbeat aspects of the Labor Department's September payroll report led to a sell-off in Treasuries on Friday and pushed benchmark yields to their highest levels in about two weeks. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Graphic: Euro debt crisis

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The U.S. bond market was closed on Monday for to the Columbus Day holiday.

Safe-haven appetite for Treasuries was mitigated by some selling by bond dealers in anticipation of this week's $66 billion in coupon supply.

In addition, the Treasury Department sold $32 billion in three-year notes on Tuesday at a high yield of 0.346 percent.

The Treasury Department will sell $21 billion in 10-year debt on Wednesday and $13 billion in 30-year bonds on Thursday.

In addition, the Federal Reserve resumed transactions under its Operation Twist program, which involves selling shorter-dated Treasuries and purchasing longer-dated issues in a bid to hold down long-term borrowing costs to help the economy. It bought $1.89 billion in Treasuries due in February 2036 to August 2042.

Fed Vice Chairwoman Janet Yellen was scheduled to speak at 8:30 p.m. (0030 GMT) about sovereign risk and financial markets at an event sponsored by the IMF and the Japanese Ministry of Finance.

"The market is struggling with a lot of moving parts," said Robert Tipp, chief investment strategist with Prudential Fixed Income in Newark, New Jersey. "At the end of the day, we'll be in a pretty tight trading range."

On the open market, benchmark 10-year notes

were

up 06/32 in price to yield 1.713 percent, down from 1.748 percent late on Friday, the highest level since Sept 24.

Thirty-year bonds

rose 25/32 in price to yield 2.930 percent, down from Friday's close of 2.9703. The 30-year yield slipped below its 200-day moving average of 2.939 percent, according to Reuters data.

Wall Street stocks fell, with the Standard & Poor's 500 index

0.77 percent lower. Traders will focus on the earnings of Dow component Alcoa

after the market close. Analysts expect the aluminum producer broke even in the third quarter.

(Additional reporting by Luciana Lopez; Editing by Dan Grebler and Leslie Adler)

((luciana.f.lopez@thomsonreuters.com)(+1 646 223 6319)(Reuters Messaging: luciana.f.lopez.thomsonreuters.com@reuters.net))

((-------MARKET SNAPSHOT AT 2:43 p.m. EDT (1843 GMT)------- March T-Bond (+) March 10-Year note (+) Change vs Current Nyk yield Three-month bills 0.0975 (+0.00) 0.099 Six-month bills 0.14 (+0.00) 0.142 Two-year note 99-31/32 (+) 0.262 Five-year note 99-26/32 (+02/32) 0.662 10-year note 99-07/32 (+06/32) 1.713 30-year bond 96-14/32 (+25/32) 2.930 DOLLAR SWAP SPREADS LAST Change U.S. 2-year dollar swap spread 12.00 (-1.75) U.S. 3-year dollar swap spread 11.75 (-1.50) U.S. 5-year dollar swap spread 13.50 (-0.50) U.S. 10-year dollar swap spread 5.75 (-0.50)

U.S. 30-year dollar swap spread -22.00 (-0.75)))

Keywords: MARKETS USA BONDS/

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