October 25, 2018 / 1:59 PM / 25 days ago

CORRECTED-TREASURIES-Yields near three-week lows amid stock market volatility

(Corrects full name of Ford in second paragraph)

* Equity volatility boosts safe-haven buying

* 10-year notes test technical resistance

* Treasury to sell $31 bln seven-year notes

By Karen Brettell

NEW YORK, Oct 25 (Reuters) - U.S. Treasury held near three-week lows on Thursday as volatile equity markets boosted demand for low-risk U.S. government debt, though technical resistance limited bond price gains.

Strong earnings reports from companies such as Microsoft Corp and Ford Motor Co helped stock indexes rebound from five-month lows on Thursday, though investors remained cautious of further weakness.

“The market’s still worried about the U.S. equity market volatility,” said Tom di Galoma, a managing director at Seaport Global Holdings in New York.

Concerns about a slowdown in China, tensions between the European Union and Italy regarding Italy’s spending plans, and some weak U.S. corporate earnings reports have hurt risk sentiment this week.

They have also prompted some speculation that weak equity markets could derail the Federal Reserve’s plans to execute further interest rate hikes.

At the same time, investors are worried that trade tariffs and a tight labor market will push wages and inflation higher, which could necessitate additional rate increases.

Benchmark 10-year Treasury yields dropped to 3.09 percent on Wednesday, the lowest since Oct. 3, before rising back to 3.12 percent on Thursday.

The yields are testing technical resistance at around 3.09 - 3.13 percent, which was a seven-year high set in May, before being breached earlier this month. The yields rose as high as 3.26 percent on Oct. 9.

“We’ve had issues getting through this 3.13 (percent) level and staying below it, mainly because I think it was a big breakout level in the market,” said di Galoma.

The Treasury Department will sell $31 billion in seven-year notes on Thursday, the final sale of $108 billion in coupon-bearing supply this week.

A $39 billion sale of five-year notes on Wednesday saw the weakest demand since 2009 by direct bidders, which includes some foreign central banks.

A $38 billion sale of two-year notes on Tuesday was marked by solid demand.

This week’s economic focus is Friday’s reading of gross domestic product for the third quarter. (Editing by Bernadette Baum) )

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