TREASURIES-Prices dip, investors wary before debt showdown
* Prices dip; govt shutdown and debt ceiling in focus
* Treasury will sell $30 bln three-year notes, $30 bln 4-week T-bills
* Fed to buy $1.25-$1.75 bln bonds due 2036-2043
* Fed meeting minutes on Wed watched for tapering clues
NEW YORK, Oct 8 (Reuters) - U.S. Treasuries prices fell on Tuesday, though yields held in the middle of their recent range, as the U.S. government shutdown entered its eighth day and investors were wary that squabbling in Washington could delay an increase in the debt ceiling. The U.S. political gridlock has made many investors hesitant to enter new trades as there are few signals from Washington over when the shutdown or debt ceiling may be resolved. Many U.S. economic releases that are issued by the government, including Tuesday's international trade data and the crucial monthly payrolls data that had been scheduled for last Friday, have been also delayed by the shutdown, muddying insight into the economy. "A lot of people are just sitting on their hands because they don't even know how to play this, and the risk of being offside is immense because this could be resolved anywhere from the next minute to the next few weeks," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. U.S. Treasury Secretary Jack Lew has warned Congress the United States would exhaust its borrowing capacity no later than Oct. 17, at which point it would have only about $30 billion in cash on hand. Markets are likely to become more volatile as that date approaches, as fears will likely grow that the political dysfunction may be too great to pass a resolution to raise the debt ceiling. "As we get closer you will see the market start to care quite a bit more, it will become more real," said Goldberg. Benchmark 10-year notes were last down 5/32 in price to yield 2.65 percent, up from 2.63 percent late on Monday. The yields have struggled to break below resistance at around 2.60 percent. Some investors are avoiding shorter-dated bills that come due in mid-and late-October, which are most at risk of any delay in being repaid. One-month Treasuries bills yields jumped to 0.20 percent on Tuesday, the highest since August 2011, when fears over the debt ceiling also spiked. The bills are yielding more than three-month and six-month bills, which pay 0.04 percent and 0.07 percent, respectively. The Treasury has also been cutting its sales of short-dated debt to make room as it approaches the debt ceiling limit. It will sell $30 billion in four-week bills on Tuesday, $5 billion less than its previous four-week sale. With little clarity coming from Washington, many investors will be looking for clues over central bank policy on Wednesday when the Federal Reserve will release minutes from its policy meeting last month, when it shocked markets by deciding not to begin reducing its $85 billion a month bond-purchase program. In particular traders will be looking for any new clarity on what factors made the bank decide against tapering at that meeting, and how close the decision not to pare purchases was. The Treasury will also sell $30 billion in three-year notes on Tuesday, the first in $64 billion in new coupon-bearing supply this week. It will sell $21 billion in 10-year notes on Wednesday and $13 billion of 30-year bonds on Thursday. The Fed will buy between $1.25 billion and $1.75 billion in bonds due 2036 and 2043 on Tuesday as part of its ongoing bond purchases.