* Record highs on Wall Street reduce bonds' appeal
* Data hint U.S. manufacturing sector decelerating
* U.S. overnight repo rates rise to three-week high
* Bond funds worldwide saw outflow in latest week -BAML
NEW YORK, Nov 15 (Reuters) - U.S. Treasury debt prices were little changed on Friday after the fading of a rally sparked by Federal Reserve Chair nominee Janet Yellen, who said the U.S. central bank will likely cling to its stimulative monetary policy. Safe-haven demand for government debt also suffered as major Wall Street stock indexes hit intraday record highs a day after Yellen's testimony at a Senate panel hearing on her nomination. On light trading volume, prices of benchmark 10-year Treasury notes were little changed on the day at 100-13/32 to yield 2.703 percent, while the 30-year bond was up 2/32 in price at 99-6/32 for a yield of 3.797 percent. "The equity market is taking direction from Yellen's dovish remarks. They're taking away some support for bonds," said Larry Milstein, head of government and agencies trading at R.W. Pressprich & Co. in New York. Treasuries prices had climbed after Yellen, in her prepared remarks released late Wednesday, said the central bank has "more work to do," which dampened expectations of a pullback in stimulus in December. But the gains faded after a weak $16 billion 30-year bond auction on Thursday following the hearing. "Bonds are really listless today," said Mary Beth Fisher, head of U.S. interest rates strategy at SG Corporate & Investment Banking in New York. "The market has reversed the gains from Yellen." Despite Friday's move lower, bonds this week recouped about a third of the losses tied to the encouraging October jobs report a week ago. On the week, the 10-year and 30-year yields were on track to fall 4 basis points. They rose 13 basis points and 15 basis points last week, respectively. Friday's disappointing data on manufacturing supported Yellen's case for further stimulus. U.S. industrial output unexpectedly fell 0.1 percent in October, while the New York Fed said its gauge on regional manufacturing showed a contraction for the first time in six months.
The Fed on Friday bought $917 million of Treasuries due in February 2025 to February 2031 as part of its latest stimulus program. The Fed purchase, together with the mildly weak data, mitigated pressure from this week's $70 billion in coupon-bearing supply, which bond dealers will likely resell into the open market in coming days. Dealers' demand to fund their Treasuries purchases this week has increased overnight borrowing costs in the repurchase agreement market. They were last quoted at 0.14-0.18 percent, which was the highest level in about three weeks. This compared with 0.11-0.14 percent late on Thursday. While Fed and other major central banks have signaled they will persist with easy money policies, investors have not jumped back into bonds since their dramatic summer sell-off. Investors pulled $2.7 billion from bond funds worldwide in the latest week, bringing the outflows from them to $85 billion since June, according to a Bank of America Merrill Lynch Global Research report released on Friday.