Wires

TREASURIES-Prices gain in thin volume on global growth fears

* IMF warns euro zone crisis threatens global growth

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

* Fed sells $7.8 billion in short-dated debt

(Updates to late afternoon)

By Richard Leong and Luciana Lopez

NEW YORK, Oct 10 (Reuters) - U.S. Treasuries prices rose onWednesday after a sale of 10-year notes as investors worriedabout the health of the global economy and short bets foundthemselves squeezed.

While traders had sold off earlier in the day to prepare forthe $21 billion sale of 10-year notes, part of this week's $66billion in coupon-bearing offerings, Treasuries retraced thatlost ground after the auction.

"There was some short covering, and that helped give theauction a pretty solid bid," said Kim Rupert, managing directorof global fixed-income analysis at Action Economics LLC in SanFrancisco.

The higher prices in turn spurred more shorts to step in andcover their positions, she said. Volume remained thin, Rupertadded.

The auction showed strong results, Nomura strategists saidin a note, calling the non-dealer demand "a signal that there isbroad-based demand for 10s at these levels."

Worries about the global economy, including the euro zonedebt crisis, also supported safe-haven Treasuries, traders said.

In a report on Wednesday, the International Monetary Fundwas sharply critical of European policymakers for their failureto restore confidence.

"The fear factor remains. The IMF underscored the bad newsfrom Europe and its impact on the global economy," said SharonStark, chief fixed income strategist at Sterne Agee & Leach inBirmingham, Alabama.

The IMF, which will hold its semi-annual meeting in Tokyothis week, downgraded its outlook on global economic growth andsaid the euro area's economy is likely to contract this year. Italso 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 earnings,should support demand for the longer-dated Treasuries supplythis week, Stark 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 bolster the economy.

In addition, the Federal Reserve in its September Beige Bookreport said its business contacts suggest economic activity isstill expanding modestly in most regions though pockets ofweakness and strained labor markets remain a problem for somedistricts.

The Beige Book offers anecdotal information on U.S. businessactivity collected by the Fed's 12 regional banks, and thefindings will likely become "the basis of discussion" among Fedpolicymakers 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 - speak at separate events onWednesday.

Minneapolis Federal Reserve Bank President NarayanaKocherlakota, who proposed last month that the Fed hold interestrates near to zero until U.S. unemployment was back under 5.5percent, also said his proposal required a collective forecast.

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

9/32 higher in price, yielding 1.684 percent from 1.7130 percenton Tuesday.

Thirty-year bondsrose 23/32 in price to yield2.889 percent, compared to 2.925 percent on Tuesday.(Editing by James Dalgleish)

((luciana.f.lopez@thomsonreuters.com)(+1 646 223 6319)(ReutersMessaging: luciana.f.lopez.thomsonreuters.com@reuters.net))

((-------MARKET SNAPSHOT AT 3:59 p.m. EDT (1959 GMT)-------March T-Bond(+)March 10-Year note(+)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 note99-27/32 (+01/32) 0.65910-year note99-15/32 (+09/32) 1.68430-year bond97-08/32 (+23/32) 2.889DOLLAR SWAP SPREADSLAST ChangeU.S. 2-year dollar swap spread 12.00 (-0.25)U.S. 3-year dollar swap spread 11.00 (-0.50)U.S. 5-year dollar swap spread 13.25 (unch)U.S. 10-year dollar swap spread 5.50 (unch)

U.S. 30-year dollar swap spread -22.00 (+0.25)))

Keywords: MARKETS USA BONDS/