TREASURIES-U.S. bond prices fall on Bunds, corporate supply
* Yields hold in tight range before Wednesday's data
* Fed's Bernanke to speak about policy, communication
* U.S. 10-year swap spread tightest since January
NEW YORK, Nov 19 (Reuters) - U.S. Treasuries prices fell on Tuesday as investors pared their bond holdings on weakness in European bonds and competition from corporate bond supply.
Treasury yields held in a tight trading range as investors awaited possible surprises in data on retail sales, consumer prices and housing starts on Wednesday, which might change the timing of the Federal Reserve's trimming its bond-purchase stimulus.
"The market looks fairly valued right now," said Zach Pandl, senior interest rate strategist at Columbia Management in Minneapolis.
Investors reckoned the U.S. central bank would dial back its $85 billion monthly purchases of Treasuries and mortgage-backed securities in the first half of 2014 after remarks from Fed Vice Chair Janet Yellen last week to the Senate Banking Committee at a hearing on her nomination to head the Fed.
"Monetary policy is likely to remain highly accommodative long after one of the economic thresholds for the federal funds rate has been crossed," Yellen wrote to Massachusetts Senator Elizabeth Warren in a letter released on Tuesday.
Chicago Fed President Charles Evans, who is a voter on the Fed's policy-setting group this year, echoed that view on Tuesday. He said the benefits of the Fed's third round of large-scale bond purchases far outweigh their costs for now.
The Fed bought $3.171 billion in Treasuries that mature from May 2021 to August 2023 as part of this month's planned $45 billion purchases of U.S. government debt.
On the open market, benchmark 10-year Treasury notes were 9/32 lower in price with a yield of 2.710 percent, up 3 basis points from late on Monday.
The 30-year bond was down 19/32 in price to yield 3.799 percent, up 3 basis points from Monday.
As of 2 p.m. (1900 GMT), $200.666 billion of cash Treasuries changed hands, which was 15 percent below the 20-day average, according to ICAP, the world's biggest interdealer-broker for U.S. government data.
In the derivatives market, the notion the Fed will do all it can to hold short-term interest rates near zero through at least 2015 has reduced volatility and lowered private borrowing costs.
The difference between the rate on 10-year U.S. interest rate swaps and the yield on 10-year Treasury notes briefly contracted to 4.00 basis points earlier, which was the tightest level in 10 months. The 10-year swap spread was last quoted at 5.25 basis points, 0.75 basis point tighter on the day.
Treasuries prices slipped initially, in line with German Bunds, after a survey showed German analyst and investor sentiment beat expectations in November. Sentiment rose to its highest in four years, helped by a slightly improved economic outlook for the euro zone.
Competition from this week's corporate bond supply added to the selling in U.S. government debt. Analysts forecast at least $20 billion of debt from top-credit companies would be sold this week, according to IFR, a unit of Thomson Reuters.
Fed Chairman Ben Bernanke was scheduled to speak to the National Economics Club at 7 p.m. EST (00:00 GMT). He will speak about communication and monetary policy.
Bernanke's remarks would be "extremely timely since markets are expecting Janet Yellen to bring further innovation to the Fed's communication as she begins her probable chairmanship next year," said Jake Lowery, Treasury trader and portfolio manager for global interest rates at ING U.S. Investment Management, which manages $190 billion in assets.
"Markets will be on the lookout for Bernanke's opinion of the effectiveness of further dovish guidance," he added.
After they digest Bernanke's remarks overnight, traders will receive government figures on U.S. retail sales, existing home sales, consumer prices and minutes from the Fed's Oct 29-30 policy meeting.
Economists expected consumer prices were little changed in October and retail sales likely grew by an anemic 0.1 percent last month as households held back spending due to a sluggish job growth and anxiety stemming from the 16-day government shutdown.