TREASURIES-U.S. bond prices end little changed
* Analysts see support at current yield levels
* U.S. mortgage applications tumbled last week
* Fed's Bernanke to speak on Wednesday
* U.S. to sell $21 billion in 10-year notes on Wednesday
NEW YORK, July 9 (Reuters) - U.S. Treasury debt prices held most of the previous session's gains on Tuesday, signaling investor support at the lower price and higher yield levels reached as the market reacted sharply to the prospect of reduced stimulus from the Federal Reserve. Since Fed Chairman Ben Bernanke in May discussed eventually scaling back the Fed's stimulative bond-buying program, Treasuries prices have fallen and benchmark 10-year note yields have risen about one percentage point. Bond prices were kicked lower again on July 5 after the government's June employment report looked stronger than the market had anticipated. But on Monday, at least a contingent of investors saw value in the lower prices and higher yields and bought Treasuries, lifting prices and allowing yields to ease. The retention of most of those gains on Tuesday gave the bounce more credibility. U.S. 10-year Treasury notes were unchanged in price, yielding 2.63 percent. The notion that Treasuries now look more attractive to investors was supported by good demand for the Treasury's $32 billion auction of three-year notes. The ratio of bids received to those accepted was 3.35, higher than the average 3.27 bid-cover ratio for the last four three-year note auctions. Treasuries had built in a "modest outright concession" before the 1 p.m. EDT (1700 GMT) bidding deadline on Tuesday, "plus 3s were the underperformer on the curve," noted CRT Capital Group government bond strategist Ian Lyngen. The Treasury will sell 10-year notes on Wednesday and 30-year bonds on Thursday. The market on Wednesday will also be looking to the release of minutes from the June 18-19 Fed policy meeting, but Fed Chairman Bernanke's remarks at 4:10 p.m. EDT (2010 GMT) are seen as more widely anticipated. The prospect of hearing Bernanke's latest views helped stabilize the market in the Tuesday session, said Quincy Krosby, market strategist at Prudential Financial. "Expectations are he's going to try to dampen worries over the scaling back of bond purchases and try to calm the market's fears that tapering is going to be aggressive," she said. Bernanke will speak on "The First 100 Years of the Federal Reserve: The Policy Record, Lessons Learned and Prospects for the Future," and questions from the audience are expected. While Bernanke chooses his words in a measured, careful way, his comments in May came up "against a market that has used leverage in an effort to gain yield," Krosby noted. As a result, "any hint or any sign - and certainly tapering represents a change in policy - forced an unwinding of positions that pushed Treasury yields higher," she said. The higher rates could hurt the economy, a scenario that could stabilize Treasury yields or even create enough demand for safe-haven U.S. debt that yields would decline, Krosby said. "You're already seeing housing sector stocks take a hit and mortgage applications fell last week," she said. "The market is paying attention to this because the housing recovery, with its impact on household wealth and consumer confidence, is crucial to the overall economic recovery." Seasonally adjusted mortgage applications fell 11.7 percent last week, the Mortgage Bankers Association said on Tuesday. One impending risk to Treasuries is the prospect of more selling by retail investors when they read their quarterly statements, Krosby said. "If they do sell, that will create more volatility in an already vulnerable asset class," she said. Benchmark yields climbed to 2.755 percent - a level not seen since August 2011 - before buyers came in on Monday. A survey from J.P. Morgan Securities released on Tuesday showed investors overall had added longer-dated Treasuries for a second consecutive week, but speculative types signaled they anticipated yields to resume their rise. The U.S. Treasury will sell $21 billion of 10-year supply on Wednesday, followed by a $13 billion auction of 30-year bonds on Thursday. The Fed bought $3.15 billon in Treasuries that mature in August 2020 through February 2023 on Tuesday as part of its ongoing bond-buying program aimed at getting the economy to grow strongly enough to bring down U.S. unemployment.