Wires

TREASURIES-Prices fall as traders prepare for 10-year sale

* IMF warns euro zone crisis threatens global growth

* U.S. to sell $21 billion in 10-year notes

* Fed sells $7.8 billion in short-dated debt

* Fed to release Beige Book on economic conditions

(Updates market action, adds comment)

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 limited, however, by worry about the globaleconomic slowdown caused mainly by the euro zone debt crisis. Ina report on Wednesday, the International Monetary Fund wassharply critical of European policymakers for their failure torestore confidence.

The market decline is "just positioning ahead of theauction," Sharon Stark, chief fixed income strategist at SterneAgee & Leach in Birmingham, Alabama. "The fear factor remains.The IMF underscored the bad news from Europe and its impact onthe 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 1.743 percent

early Thursday, more than 1 basis point belowthe yield at last month's auction.

This "when issued" 10-year yield level should entice solidbids among some fund managers, analysts said. "There seems to bea yield bogy when the yield gets above 1.70 percent," saidGeorge Goncalves, head of U.S. interest rate strategy at NomuraSecurities International in New York.

The previous two 10-year auctions elicited mediocre demandfrom big investors and overseas central banks. This put pressureon primary dealers, Wall Street firms that do business directlywith the Fed, to absorb the remaining supply and resell it inthe open market later, analysts said.

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.

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Graphic: Euro debt crisis:

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The Federal Reserve also sold $7.8 billion in Treasuries dueApril 2014 to February 2015 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.

The Beige Book findings will likely become "the basis ofdiscussion" among Fed policymakers when they meet on Oct. 23-24,Sterne's Stark said.

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

were

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

Thirty-year bonds

fell 14/32 in price to yield2.948 percent, up 2.3 basis points from Tuesday. The 30-yearyield edged above its 200-day moving average of 2.939 percent,according to Reuters data.

(Reporting by Richard Leong; Editing by Kenneth Barry)

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

((-------MARKET SNAPSHOT AT 11:21 a.m. EDT (1521 GMT)-------Dec T-Bond147-24/32 (-07/32)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 note99-23/32 (-03/32) 0.68110-year note98-31/32 (-08/32) 1.73930-year bond96-03/32 (-15/32) 2.948DOLLAR SWAP SPREADSLAST ChangeU.S. 2-year dollar swap spread 12.25 (unch)U.S. 3-year dollar swap spread 11.50 (unch)U.S. 5-year dollar swap spread 13.00 (-0.25)U.S. 10-year dollar swap spread 5.00 (-0.50)

U.S. 30-year dollar swap spread -22.25 (unch)))

Keywords: MARKETS USA BONDS/