TREASURIES-Prices slip on Fed's planned stimulus pullback
* Fed speakers look to soothe jittery markets
* Durable goods orders for May better than expected
* Personal consumption expenditures data on Thursday to be scrutinized
NEW YORK, June 25 (Reuters) - Prices for U.S. Treasuries edged down slightly in volatile trading on Tuesday, extending a slump that has taken yields to near two-year highs, as investors weigh a possible Fed pullback on its massive bond-buying program. Investors dumped assets around the world - including stocks and government debt - after Federal Reserve Chairman Ben Bernanke last week said the bank could slow its $85 billion-per-month in Treasuries and mortgage backed securities purchases as the economy gains momentum. But Fed speakers late on Monday took pains to reassure markets that policymakers were not looking to exit all their easing measures anytime soon. Minneapolis Fed President Narayana Kocherlakota said investors were wrong to view the central bank as having become more keen to tighten policy than it was before last week's policy meeting. Richard Fisher, the hawkish head of the Dallas Fed, added that the Fed's ultimate "exit strategy" is still a ways out in the future. "Going forward I think they're going to be more careful how they phrase things or release their statements," Dimitri Delis, interest-rate strategist at BMO Capital Markets in Chicago. "The only big unknown here in my mind is if the economy truly improves, you truly get the traction that you need here, and the Fed can really get out of" quantitative easing, he said. But he cautioned that, with inflation readings low and the housing and equity markets potentially fragile in the face of a Fed exit, policymakers could be cautious about stepping on the brakes. Benchmark 10-year Treasuries fell 2/32 in price to yield 2.552 percent, up from 2.544 percent late on Monday, when the yield hit its highest in 22 months. The 30-year bond saw choppy trading, last down 8/32 to yield 3.571 percent compared with 3.557 percent late on Monday. Data on Tuesday underscored an improvement in the economy. Orders for long-lasting U.S. manufactured goods rose more than expected in May and a gauge of planned business spending increased for a third straight month.
The afternoon will see a test of market appetite for Treasuries at their current levels, when the Treasury will sell $35 billion in two-year notes. "The latest FOMC induced sell-off offers attractive yields and the front-end of the curve remains an ideal place to fade the supposedly economic-recovery led sell-off," Nomura rates strategists wrote in a note to clients. The Treasury will also sell $35 billion in five-year notes on Wednesday and $29 billion in seven-year notes on Thursday. Other data later in the week will also prove key for investors looking to gauge Fed exit options. Personal consumption expenditures data on Thursday for May will be closely scrutinized for signs of whether inflation is stabilizing at lower levels, rising or if price pressures are continuing to fall. The index fell to a record low of 1.05 percent over the year in April, and a continued fall may make it less likely that the Fed is able to pare back its record stimulus.