TREASURIES-Yields climb as hawkish Fed speakers favor tapering

* Short-covering since employment report seen as completed

* Prices dip as retail sales point to stronger U.S. economy

* Fed buys $1.39 bln bonds due 2038-23

* Treasury sells $15 bln four-week notes at zero yields

By Karen Brettell

NEW YORK (Frankfurt: HX6.F - news) , Jan 14 (Reuters) - U.S. Treasury yields rose on

Tuesday as two Federal Reserve officials said they support

further cuts to the U.S. central bank's bond purchase program,

despite Friday's weaker-then-expected employment report.

Charles Plosser, president of the Philadelphia Fed, and

Dallas Fed chief Richard Fisher, who spoke separately on

Tuesday, are both considered policy hawks.

Plosser downplayed the payrolls report and said he would

prefer a quicker-than-planned withdrawal of policy stimulus.

Fisher said the Fed should pare its bond buying as quickly

as possible, even if doing so sends stock prices tumbling,

because more bond buying risks inflation and makes an eventual

exit from easy policies more difficult. [ID: nN9N0AR023]

Five-year notes, which are among the most sensitive to Fed

interest rate policy, were among the worst performers, and

benchmark 10-year notes retraced all of Monday's gains.

The selloff came after a two-day rally, which was caused in

large part by investors who on expectations of strong jobs

numbers had taken short positions heading into Friday's payrolls

report and then had to cover those trades.

"Plosser and Fisher, both noted hawks, reiterated their view

of QE and the economy," said Jason Rogan, managing director in

Treasuries trading at Guggenheim Partners in New York. At the

same time, the selloff is "a retracement of a really good

short-cover rally after Friday's number that continued into

yesterday. Most of the shorts were pushed out and forced to

cover."

Five-year notes were last down 8/32 in price to

yield 1.652 percent, up from 1.589 percent late on Monday. The

10-year notes fell 11/32 in price to yield 2.875

percent, after holding levels of around 2.82 percent overnight,

where there is strong technical resistance.

Investors raised their holdings of longer-dated Treasuries

after the jobs data, according to a survey released on Tuesday

by J.P. Morgan Securities.

The share of investors who on Monday said their holdings of

longer-dated U.S. government debt were greater than their

holdings of portfolio benchmarks rose to 19 percent from 13

percent a week earlier, J.P. Morgan (Other OTC: MGHL - news) said.

Friday's employment report also caused some investors to

reevaluate growth expectations for this year, which had been

getting more bullish.

The Fed bought $1.39 billion in bonds due between 2038 and

2043 on Tuesday as part of its ongoing purchase program.

It will purchase between $4 billion and $5

billion in notes due 2018 and 2019 on Wednesday.

Solid (KOSDAQ: 050890.KQ - news) retail sales data on Tuesday also eased some concerns

about economic growth, with many saying that the employment

figure was likely an aberration hurt by factors such as bad

weather.

"I don't think a lot has changed here, I think Friday's

number was an outlier," said Charles Comiskey, head of

Treasuries trading at Bank of Nova Scotia in New York.

The Commerce Department said on Tuesday that U.S. retail

sales, excluding automobiles, gasoline, building materials and

food services, increased 0.7 percent last month after a 0.2

percent rise in November.

Producer price data on Wednesday and consumer price data on

Thursday will next be closely watched for signs that inflation

is picking up, something that many expect but so far has failed

to materialize.

The Fed will also release its Beige Book report on

Wednesday, a collection of anecdotes from the central bank's

business contacts across the nation, which will be watched for

signs of economic strength.

The Treasury sold $15 billion in four-week bills on Tuesday

at zero yields as it cuts issuance heading into Feb. 7, when the

debt ceiling will be reinstated.

Some dealers in the interdealer market have been offering

negative bill rates to offset short positions in the repurchase

agreement market that can be costly as supply dwindles.