*

Bond liquidations send yields sharply higher

*

Volumes surge in overnight trading

*

Strong demand at 10-year Treasury note auction

(Updated in New York afternoon time)

By Karen Brettell

NEW YORK, April 9 (Reuters) -

Benchmark 10-year Treasury yields pared gains after the

Treasury saw strong demand for a $39 billion sale of the notes

on Wednesday, potentially easing concerns about deteriorating

demand for the debt.

The notes sold at a

high yield

of 4.435%, around three basis points below where they had

traded before the sale. Demand was 2.67 times the amount of debt

on offer, the highest ratio since December.

Markets have been spooked by larger than expected

tariffs placed by the Donald Trump administration on U.S.

trading partners.

Yields have surged this week as traders pile out of

Treasuries to meet margin requirements, or after reaching stop

loss levels or taking profits from a sharp rally late last week.

Speculation has also increased that large foreign

holders of Treasuries including China may be offloading some of

their portfolio as they face off against the United States in a

rapidly escalating trade war.

But indirect bidders, which includes foreign central

banks, took the 87.9% of Wednesday's sale, much higher than

their average of 70%, suggesting strong foreign demand.

The Treasury will also auction $22 billion in 30-year

bonds on Thursday.

The 10-year note yield was last up 12.6 basis

points on the day at 4.384%. It earlier reached 4.515%, the

highest since February 20.

Thirty-year bond yields gained 12.7 basis points

to 4.841% and got as high as 5.023%, the highest since November

2023.

The interest-rate sensitive two-year yield fell

1.5 basis points to 3.723%.

The yield curve between two- and 10-year note yields

surged as the shorter-dated debt remained

relatively stable compared to longer-dated debt. It reached 74

basis points, the steepest since January 2022, and was last at

66 basis points.