TREASURIES-U.S. bond prices fall, on track for weak 1st quarter

* Signs of calm in Cyprus pare safe haven bids for bonds * Below-average demand at $29 bln U.S. 7-year note sale * Disappointing Midwest factory data reduces optimism * U.S. bond market to close early on Thursday, shut Friday By Richard Leong NEW YORK, March 28 (Reuters) - U.S. Treasury debt prices fell on Thursday, as a weak first quarter drew to a close and investors failed to embrace $29 billion worth of new seven-year notes, the final leg of this week's $99 billion in longer-dated supply. Wall Street stocks' attempt to set record highs added downward pressure on bond prices, analysts said. "Equities took some luster off bonds, and the seven-year auction was a bit of a disappointment," said Anthony Valeri, fixed income strategist at LPL Financial (NasdaqGS: LPLA - news) in San Diego. Relative calm in Cyprus, where banks reopened under tight government control after they were shut for nearly two weeks and the island nation received a 10 billion euro bailout, diminished some safe haven demand for low-yielding U.S. government debt. The controls resulted from fears of heavy withdrawals from Cypriot banks after losses on large uninsured deposits, required as a part of Cyprus' financial rescue. Traders feared European leaders might consider bank deposits to fund future bailouts of Italy, Spain and other larger euro zone economies, sparking bank runs in those countries. "All things are orderly in Cyprus. That's a good sign for investors before the long weekend," said Jason Rogan, director of Treasuries trading at Guggenheim Partners in New York. Still appetite for bonds emerged as longer-term worries about Europe persisted. "A lot people don't want to go home short so that will put a floor on prices," Rogan said. The market's losses were also mitigated by data showing a steep decline in U.S. Midwest manufacturing, which revived some concerns the U.S. economy might slow in spring and summer like the previous three years. The U.S. bond market will close at 2 p.m. (1800 GMT) on Thursday, and it will remain shut for the Good Friday holiday. Many major European markets will be closed on Friday and Monday. On the open market, the benchmark 10-year U.S. Treasury note was down 1/32 in price to yield 1.849 percent, near its three-week low set on Wednesday. The 30-year bond was 6/32 lower in price, yielding 3.096 percent, up 1 basis point from late on Wednesday. ANOTHER WEAK FIRST QUARTER The Treasuries market was poised for a losing first-quarter for a third straight year, although renewed fears about the festering euro zone debt crisis limited the sector's losses. Barclays (LSE: BARC.L - news) ' total return index on U.S. Treasuries has fallen 0.13 percent in the first three months of 2013, after a 0.09 percent decline in the fourth quarter of last year. In contrast, Wall Street stocks revisited levels prior to the global financial crisis more than four years ago. The Standard & Poor's 500 index briefly traded above its record close on Thursday and was on track to post a 9.58 percent in the first quarter. Bond prices bounced back from their session lows after the Institute for Supply Management-Chicago said its index on Midwest business activity posted a surprisingly large drop in March, lowering optimism about the U.S. economy. Then the Treasuries market revisited lows after the sale of the seven-year notes resulted in the yields to clear at 1.248 percent, about half a basis point higher than what traders had expected. Separately, the U.S. Federal Reserve purchased $4.762 billion in Treasuries that mature in March 2017 to Nov. 2017. This was the latest purchase for its bond program, dubbed QE3, aimed to hold down mortgage rates and other long-term borrowing costs to support the economy.