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TREASURIES-U.S. bond yields rise on supply, stock gains

* Wall Street stock prices reduce demand for Treasuries

* Latest U.S. 2-year note sale fetches most bids in a year

* Safety bids tied to UK suicide bombing limit yield rise

* FOMC minutes, $34 bln 5-year note auction on tap

(Updates throughout, adds quote) NEW YORK, May 23 (Reuters) - U.S. Treasury yields rose on Tuesday as some investors pared their bond positions to make room for this week's federal and corporate supply while others reduced their safe-haven bond holdings in favor of stocks. Some traders also turned cautious ahead of the release of the Federal Reserve's minutes of its May 2-3 meeting at 2 p.m. (1800 GMT) on Wednesday. They may contain clues on the timing of the next rate increase and a possible plan for slowing the central bank's bond reinvestments, analysts said. Wall Street stock prices rebounded further on Tuesday from last week's lows as investors seemed relieved that U.S. President Donald Trump's budget plan contained no big surprises.

Last Wednesday, stocks tumbled and bonds rallied with yields falling to near one-month lows as news reports raised worries about whether the widening probe into the Trump campaign's possible ties with Russia in 2016 would hurt the chances of the passage of tax cuts and other fiscal stimulus. Those fears have abated since even as more stories that cast a cloud over Trump's presidency have emerged, analysts said. "As the perception of risk has faded, we are starting to revert to the mean," said Bruno Braizinha, interest rate strategist at SG Corporate & Investment Banking in New York. The benchmark 10-year Treasury yield was 2.287 percent, up three basis points from late on Monday, while the 30-year yield was more than three basis points higher at 2.949 percent. U.S. yields reversed their earlier drop because of safe-haven bids stoked by a suicide bombing that killed at least 22 people and injured 59 at a concert hall in the English city of Manchester Monday evening. A solid $26 billion of a two-year note auction, the first part of this week's $88 billion in coupon-bearing government bond supply, failed to rekindle bids for Treasuries on the secondary market. The latest two-year sale fetched the strongest bidding in a year. The U.S. Treasury Department will sell $34 billion in five-year notes on Wednesday. Investors and dealers were also contending with substantial corporate supply. Companies were expected to issue up to $35 billion in high-grade bonds this week before a three-day U.S. holiday weekend, according to IFR, a Thomson Reuters unit.

The U.S. bond market will close early at 2 p.m. (1800 GMT) on Friday and will be shut on Monday for the Memorial Day holiday.

May 23 Tuesday 3:51PM New York / 1951 GMT Price

US T BONDS JUN7 153-7/32 -0-18/32 10YR TNotes JUN7 125-228/256 -0-60/25

6

Price Current Net Yield % Change

(bps)

Three-month bills 0.92 0.935 0.010 Six-month bills 1.055 1.0754 0.007 Two-year note 99-228/256 1.3073 0.028 Three-year note 100-10/256 1.4865 0.033 Five-year note 100-56/256 1.8283 0.031 Seven-year note 99-100/256 2.0948 0.033 10-year note 100-204/256 2.2852 0.031 30-year bond 101-4/256 2.9487 0.034

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 23.50 -0.50

spread

U.S. 3-year dollar swap 19.75 -1.00

spread

U.S. 5-year dollar swap 6.75 -0.75

spread

U.S. 10-year dollar swap -6.25 0.25

spread

U.S. 30-year dollar swap -45.75 1.00

spread

(Reporting by Richard Leong; Editing by Paul Simao and Steve Orlofsky)