TREASURIES-U.S. yields dip as investors remain cautious

* Abu Dhabi $10 bln sovereign bond issue draws strong demand

* Traders sell long-end Treasuries to make way for Abu Dhabi deal

* Markets starting to focus Fed chair announcement

(Adds new comment, updates prices) NEW YORK, Oct 3 (Reuters) - U.S. Treasury debt yields fell on Tuesday in volatile trading as the market remained cautious two days after a mass shooting in Las Vegas, with investors also continuing to weigh the prospects of another interest rate hike this year. The Las Vegas tragedy has remained on investors' radars, said Jim Vogel, interest rates strategist, at FTN Financial in Memphis, Tennessee. The Sunday night shooting spree from a 32nd-floor window of the Mandalay Bay hotel, on the Las Vegas Strip, killed at least 59 people before the gunman turned a weapon on himself. More than 500 people were injured, some trampled, in the deadliest mass shooting in modern U.S. history. "That still represents a pall over the markets. People are not doing bold strategies right now, just small ones," Vogel said. U.S. 30-year bond yields, which move inversely to prices, were higher though, with investors absorbing a mammoth sovereign bond deal from Abu Dhabi valued at $10 billion, analysts said. Abu Dhabi sold its first ever 30-year sovereign bond on Tuesday as part of a $10 billion triple-tranche debt issue that drew heavy demand. Its issue of five-, 10- and 30-year maturities had attracted more than $30 billion in demand.

Investors sold long-end Treasuries as a hedge to make way for the new bond issue, analysts said. In late trading, the benchmark 10-year U.S. Treasury note yield was 2.335 percent, down slightly from 2.337 percent late on Monday, while the 30-year yield was up at 2.876 percent, compared with Monday's 2.865 percent. U.S. two-year notes were at 1.475 percent, down from 1.487 percent on Monday. Tom di Galoma, managing director at Seaport Global Holdings in New York said the bond market was starting to turn its attention to the deliberations at the White House over who might lead the Federal Reserve starting next year. Aside from Fed Chair Janet Yellen, whose current term expires in February, among those being considered are ex-Fed Governor Kevin Warsh and current Fed Governor Jerome Powell. Both Warsh and Powell were interviewed at the White House last week. "Any Fed chair announcement that comes over the next two to three weeks will be viewed as a hawkish announcement just because Yellen is such a dove," said di Galoma. "And so I think the market is starting to support the theme that whoever becomes Fed chair will be raising rates faster than Yellen would be," he added. Focus has also turned to this week's U.S. non-farm payrolls report, which could shed more light on the chances of a December rate increase.

Tuesday, Oct. 3 at 1427 EDT (1827 GMT): Price

US T BONDS DEC7 152-20/32 -0-2/32 10YR TNotes DEC7 125-84/256 0-20/256 Price Current Net Yield Change (pct) (bps) Three-month bills 1.045 1.0624 0.018 Six-month bills 1.1875 1.2113 -0.005 Two-year note 99-206/256 1.475 -0.012 Three-year note 99-80/256 1.6147 -0.013 Five-year note 99-198/256 1.9228 -0.011 Seven-year note 99-196/256 2.1613 -0.010 10-year note 99-68/256 2.3336 -0.003 30-year bond 97-128/256 2.8752 0.010


Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 26.25 0.75


U.S. 3-year dollar swap 23.00 0.50


U.S. 5-year dollar swap 7.75 0.00


U.S. 10-year dollar swap -4.75 -0.25


U.S. 30-year dollar swap -32.75 -0.50


(Reporting by Gertrude Chavez-Dreyfuss; editing by Diane Craft)