TREASURIES-U.S. bond prices rise as markets look to Yellen

* Auction of $24 billion 10-year notes draws strong demand

* Benchmark yields retreat from eight-week high

* Yellen to appear before Senate Banking Committee Thursday

* Fed purchases $1.39 billion TIPS for QE3 program

By Wanfeng Zhou

NEW YORK, Nov 13 (Reuters) - U.S. Treasury debt prices rose

on Wednesday as traders bet Janet Yellen, the likely next

Federal Reserve chief, will reinforce the market's view that the

central bank will maintain accommodative monetary polices for

longer.

Yellen, currently Fed vice chair and nominated by President

Barack Obama to succeed Chairman Ben Bernanke, will speak before

the Senate Banking Committee on Thursday. Investors will closely

monitor her comments during the question-and-answer session for

hints about future policy actions.

Yellen's prepared testimony was expected to be released at

4:30 p.m. EST (Other OTC: ECPCY - news) on Wednesday, according to market sources.

Benchmark yields had spiked higher after last Friday's jobs

data raised speculation the Fed may scale back bond purchases in

December. But those expectations have eased and most analysts

still do not expect a move until some time in 2014.

"We've been unwinding some of those trades," said Kim

Rupert, managing director of fixed income analysis at Action

Economics in San Francisco.

"A little bit of a short squeeze added to the bullish

momentum, and I think a lot of this has been predicated on

beliefs that Yellen will kind of maintain a very dovish Fed."

On the open market, benchmark 10-year notes were

up 10/32 in price, yielding 2.736 percent, down 3 basis points

from late on Tuesday. Benchmark yields hit their highest since

mid-September on Tuesday.

The 30-year bond was 11/32 higher in price with

a yield of 3.836 percent.

Fed officials who spoke publicly on Tuesday signaled that

the economy, while showing some improvement, still needs support

from the current level of stimulus.

The U.S. central bank has been buying $85 billion monthly

of Treasuries and mortgage-backed securities in a third round of

so-called quantitative easing, aimed at lowering unemployment

and achieving the Fed's 2 percent inflation target.

"Now (Other OTC: NWPN - news) people are over-thinking this latest employment report.

Are we close to tapering? I don't think so, nothing

fundamentally has changed," said Bonnie Baha, head of global

developed credit group at DoubleLine Capital in Los Angeles.

Bernanke will speak about the central bank to teachers at an

event in Washington at 7 p.m. EST (0000 GMT). At the same time,

Atlanta Fed President Dennis Lockhart will give brief remarks at

a local event.

Also on Wednesday, the Treasury sold $24 billion of 10-year

notes at a high yield of 2.75 percent, with a bid-to-cover ratio

of 2.70. Indirect bidders, a category that includes central

banks, bought 47.7 percent, the biggest share since June.

The sale followed Tuesday's solid $30 billion three-year

debt offering, which fetched the strongest bidding since March.

The U.S. Treasury will complete this week's refunding with a $24

billion 30-year bond sale on Thursday.

In the meantime, the Fed bought $1.39 billion in Treasury

Inflation-Protected Securities in the latest purchase for its

QE3 program.

Benchmark yields have stayed in a 30-basis-point band since

the Fed surprised investors two months ago by deciding not to

taper its QE3 purchase program. Analysts anticipate this narrow

trading will persist until there is more proof the economy is

breaking out of its current sluggish pace of growth.

Few investors changed their Treasuries positions in the

latest week, according to a survey from J.P. Morgan Securities

released on Wednesday.

Nineteen percent of the firm's Treasuries clients surveyed

in the week ended Nov. 12 said they held more longer-dated U.S.

government debt than their portfolio benchmarks, the same amount

as last week. On the other hand, 25 percent said they held fewer

longer-dated Treasuries than their benchmarks, up slightly from

23 percent the previous week.

In "when-issued" activity, traders expected the upcoming

10-year note issue to sell at a yield of 2.759

percent. This was higher than the 2.657 percent yield at the

10-year auction in October.

This week's coupon debt auctions were expected to raise

$63.5 billion to repay investors for maturing federal debt they

hold and $6.5 billion for the government.