TREASURIES-Bond prices fall as traders set for 10-year supply

* IMF warns euro zone crisis threatens global growth

* U.S. to hold $21 billion 10-year note auction

* Fed to sell $7 billion to $8 billion in short-dated debt

* Fed to release Beige Book on economic conditions

By Richard Leong

NEW YORK, Oct 10 (Reuters) - U.S. Treasuries prices fell onWednesday as traders reduced their bond holdings to make roomfor $21 billon in 10-year note supply, part of this week's $66billion in coupon-bearing offerings.

The selling was mitigated by worries about the globaleconomy being bogged down by the euro zone debt crisis after theInternational Monetary Fund warned of the risks posed by theEuropean crisis.

"It's just positioning ahead of the auction," Sharon Stark,chief fixed income strategist at Sterne Agee & Leach inBirmingham, Alabama, said of the market decline. "The fearfactor remains. The IMF underscored the bad news from Europe andits impact on the global economy."

The IMF, which will hold its semi-annual meeting in Tokyolater this week, downgraded its outlook on global economicgrowth and said the euro area is likely to contract this year.It also called the euro zone debt crisis the biggest risk to theworld's financial health.

This dour view, together with warnings from Alcoa, Chevronand several other major U.S. firms on their future results,should support demand for the longer-dated Treasuries supplythis week, Stark said.

The 10-year note auction at 1 p.m. (1700 GMT) follows astrong $32 billion auction of three-year debt on Tuesday.

Traders expect the reopening of the 10-year note issueoriginally sold in August to sell at a yield of 1.753 percent

early Thursday, about 1 basis point below theyield at last month's auction.

The U.S. Treasury Department will complete this week's $66billion worth of coupon debt offerings with a $13 billion saleof 30-year bonds on Thursday.


Graphic: Euro debt crisis:


In the meantime, the Federal Reserve plans to sell $7billion to $8 billion in Treasuries due April 2014 to February2015 at 11 a.m. (1500 GMT) under its Operation Twist. Thisprogram involves selling shorter-dated Treasuries and purchasinglonger-dated issues in a bid to hold down long-term borrowingcosts to help the economy.

The Fed will follow the sale with the release of its BeigeBook of regional economic conditions at 2 p.m. (1800 GMT). TheBeige Books offers anecdotal information on U.S. businessactivity collected by the Fed's 12 regional banks. It will offerinsight on whether the U.S. economy slowed in late September andearly October.

Three top Fed officials -- Minneapolis Fed chief NarayanaKocherlakota, Fed Governor Daniel Tarullo and Dallas FedPresident Richard Fisher -- will speak at separate events laterWednesday.

Fed Vice Chairwoman Janet Yellen said late Tuesday lowshort-term interest rates are essential to support the U.S.economy. She spoke at an event sponsored by the IMF and theJapanese Ministry of Finance.

On the open market, benchmark 10-year notes


7/32 lower in price, yielding 1.739 percent, up over 2 basispoints from late on Tuesday.

Thirty-year bonds

fell 15/32 in price to yield2.950 percent, up 2.6 basis points from Tuesday. The 30-yearyield edged above its 200-day moving average of 2.939 percent,according to Reuters data.

(Editing by Leslie Adler)

((richard.leong@thomsonreuters.com)(+1 646 303 6313)(ReutersMessaging: richard.leong.thomsonreuters.com@thomsonreuters.net))

((-------MARKET SNAPSHOT AT 9:06 a.m. EDT (1306 GMT)-------Dec T-Bond147-21/32 (-10/32)Dec 10-Year note132-29/32 (-05/32)Change vs CurrentNyk yieldThree-month bills0.1 (+0.00) 0.102Six-month bills0.145 (+0.00) 0.146Two-year note99-31/32 (-) 0.266Five-year note99-24/32 (-02/32) 0.67610-year note98-31/32 (-08/32) 1.74130-year bond96-01/32 (-16/32) 2.951DOLLAR SWAP SPREADSLAST ChangeU.S. 2-year dollar swap spread 12.25 (unch)U.S. 3-year dollar swap spread 11.25 (-0.25)U.S. 5-year dollar swap spread 12.75 (-0.50)U.S. 10-year dollar swap spread 4.50 (-1.00)

U.S. 30-year dollar swap spread -22.75 (-0.50)))