TREASURIES-U.S. bond prices gain ahead of auctions

* Treasury to sell $56 bln supply this week

* Stronger German debt helps U.S. bonds firm

NEW YORK, Jan 8 - Treasury bond yields were modestly lower on Monday after data on Friday showing an unexpectedly slower growth in U.S. hiring for December, and before $56 billion in new bond supply this week. Job growth slowed more than expected last month amid a decline in retail employment, but a pick-up in monthly wage gains pointed to labor market strength that could pave the way for the Federal Reserve to increase interest rates in March. With Tokyo on holiday, trading volumes were low, and this morning's moves were muted. Yields on U.S. government bonds opened higher this morning before falling to rates hit late last week. Attention is now focused on new supply with the U.S. Treasury Department to auction new three-year notes on Tuesday, 10-year notes on Wednesday and 30-year bonds on Thursday. Demand for three-year notes may be mixed given that the U.S. central bank is expected to continue hiking interest rates. But sales of long-term securities are expected to go well. "Since 10-years seem to be firmly entrenched in that 2.40 percent to 2.50 percent area, I would think that should have a tendency to garner some interest," Mary Anne Hurley, vice president of fixed income at D.A. Davidson in Seattle. "As for 30-years, theres lots of demand for longer-dated paper." The three-year yield, which is sensitive to traders' views on Fed policy, rose as high as was 2.071 percent on Monday, the highest since late 2007. The yield on the U.S. 10-year note was pulled to a high of 2.489 percent before falling to 2.465 percent at 9:34 a.m. (1334 GMT). The benchmark government bond last closed at 2.476 percent. Stronger German bond yields also helped U.S. Treasuries firm on Monday. Were up following German bunds (prices) higher, said Hurley.

January 8 Monday 9:41AM New York / 1441 GMT Price

US T BONDS MAR8 152-5/32 0-11/32 10YR TNotes MAR8 123-152/256 0-20/256 Price Current Net Yield % Change


Three-month bills 1.3825 1.4063 0.002 Six-month bills 1.5525 1.5862 -0.003 Two-year note 99-216/256 1.9559 -0.004 Three-year note 99-126/256 2.0542 -0.003 Five-year note 99-74/256 2.2769 -0.008 Seven-year note 99-20/256 2.3943 -0.008 10-year note 98-32/256 2.4654 -0.011 30-year bond 99-40/256 2.7917 -0.018


Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 18.75 0.50


U.S. 3-year dollar swap 18.25 0.25


U.S. 5-year dollar swap 4.00 0.00


U.S. 10-year dollar swap -1.50 -0.50


U.S. 30-year dollar swap -20.50 -0.25


(Reporting by Kate Duguid; Editing by Alistiar Bell)