TREASURIES-U.S. bond prices fall before supply, Fed statement

* Investors expect Fed to leave rates unchanged

* 5-year note auction expected to see positive demand

By Tariro Mzezewa

NEW YORK, Oct (HKSE: 3366-OL.HK - news) 28 (Reuters) - U.S (Other OTC: UBGXF - news) . Treasuries prices fell on Wednesday ahead of debt supply and before the Federal Reserve offers its latest policy statement that traders will scour for clues on the timing when it will begin raising interest rates.

The U.S. central bank is not expected to raise rates at its two-day meeting. The statement is due at 2:00 p.m. ET (1800 GMT).

"Based on recent data, I expect the Fed to leave rates as they are, but everyone's still watching and waiting and that's why there's little action today," said Ellis Phifer, market strategist at Raymond James in Memphis, Tennessee.

On Tuesday, a drop in domestic durable goods orders in September reinforced the view of a slowdown in U.S. economic growth in the third quarter. It (Other OTC: ITGL - news) was the latest in a wave of disappointing data that support bets the U.S. central bank will not raise interest rates by year-end.

As they await for clues from the Fed, investors began selling some of their debt holdings to make room for this week's five-year and seven-year notes by the Treasury Department, both of which investors expect to perform well.

"There's plenty of maturing cash this week to put to work and while that dynamic would typically favor the two-year (notes), it will roll into the five-year (notes)," said Ian Lyngen, senior government bond strategist at CRT Capital in Stamford, Connecticut.

The Treasury Department will sell $35 billion in five-year debt and $15 billion in two-year floating-rate securities on Wednesday. It will auction $29 billion in seven-year notes on Thursday.

On the open market, benchmark 10-year Treasuries notes fell 5/32 in price to yield 2.056 percent, up 3 basis points from late Tuesday.

The 30-year bond was down 18/32 in price for a yield of 2.880 percent, up 3 basis points from Tuesday. (Reporting by Tariro Mzezewa; Editing by Chizu Nomiyama)