TREASURIES-Bond prices fall as traders set for 10-year supply
* IMF warns euro zone crisis threatens global growth
* U.S. to hold $21 billion 10-year note auction
* Fed to sell $7 billion to $8 billion in short-dated debt
* Fed to release Beige Book on economic conditions
By Richard Leong
NEW YORK, Oct 10 (Reuters) - U.S. Treasuries prices fell on Wednesday as traders reduced their bond holdings to make room for $21 billon in 10-year note supply, part of this week's $66 billion in coupon-bearing offerings.
The selling was mitigated by worries about the global economy being bogged down by the euro zone debt crisis after the International Monetary Fund warned of the risks posed by the European crisis.
"It's just positioning ahead of the auction," Sharon Stark, chief fixed income strategist at Sterne Agee & Leach in Birmingham, Alabama, said of the market decline. "The fear factor remains. The IMF underscored the bad news from Europe and its impact on the global economy."
The IMF, which will hold its semi-annual meeting in Tokyo later this week, downgraded its outlook on global economic growth and said the euro area is likely to contract this year. It also called the euro zone debt crisis the biggest risk to the world's financial health.
This dour view, together with warnings from Alcoa, Chevron and several other major U.S. firms on their future results, should support demand for the longer-dated Treasuries supply this week, Stark said.
The 10-year note auction at 1 p.m. (1700 GMT) follows a strong $32 billion auction of three-year debt on Tuesday.
Traders expect the reopening of the 10-year note issue originally sold in August to sell at a yield of 1.753 percent
early Thursday, about 1 basis point below the yield at last month's auction.
The U.S. Treasury Department will complete this week's $66 billion worth of coupon debt offerings with a $13 billion sale of 30-year bonds on Thursday.
Graphic: Euro debt crisis:
In the meantime, the Federal Reserve plans to sell $7 billion to $8 billion in Treasuries due April 2014 to February 2015 at 11 a.m. (1500 GMT) under its Operation Twist. This program involves selling shorter-dated Treasuries and purchasing longer-dated issues in a bid to hold down long-term borrowing costs to help the economy.
The Fed will follow the sale with the release of its Beige Book of regional economic conditions at 2 p.m. (1800 GMT). The Beige Books offers anecdotal information on U.S. business activity collected by the Fed's 12 regional banks. It will offer insight on whether the U.S. economy slowed in late September and early October.
Three top Fed officials -- Minneapolis Fed chief Narayana Kocherlakota, Fed Governor Daniel Tarullo and Dallas Fed President Richard Fisher -- will speak at separate events later Wednesday.
Fed Vice Chairwoman Janet Yellen said late Tuesday low short-term interest rates are essential to support the U.S. economy. She spoke at an event sponsored by the IMF and the Japanese Ministry of Finance.
On the open market, benchmark 10-year notes
7/32 lower in price, yielding 1.739 percent, up over 2 basis points from late on Tuesday.
fell 15/32 in price to yield 2.950 percent, up 2.6 basis points from Tuesday. The 30-year yield edged above its 200-day moving average of 2.939 percent, according to Reuters data.
(Editing by Leslie Adler)
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((-------MARKET SNAPSHOT AT 9:06 a.m. EDT (1306 GMT)------- Dec T-Bond 147-21/32 (-10/32) Dec 10-Year note 132-29/32 (-05/32) Change vs Current Nyk yield Three-month bills 0.1 (+0.00) 0.102 Six-month bills 0.145 (+0.00) 0.146 Two-year note 99-31/32 (-) 0.266 Five-year note 99-24/32 (-02/32) 0.676 10-year note 98-31/32 (-08/32) 1.741 30-year bond 96-01/32 (-16/32) 2.951 DOLLAR SWAP SPREADS LAST Change U.S. 2-year dollar swap spread 12.25 (unch) U.S. 3-year dollar swap spread 11.25 (-0.25) U.S. 5-year dollar swap spread 12.75 (-0.50) U.S. 10-year dollar swap spread 4.50 (-1.00)
U.S. 30-year dollar swap spread -22.75 (-0.50)))
Keywords: MARKETS USA BONDS/