By Karen Brettell

NEW YORK, Feb 15 (Reuters) - U.S. Treasuries were stable on

Friday with yields holding under key support levels at 10-month

highs after investors absorbed new supply this week, with talks

in Washington over the budget expected to dominate trading in

the coming weeks.

Benchmark 10-year notes have tested support at yields of

around 2.03 percent to 2.06 percent over the past few days but

failed to break higher, which could have set the notes up for

further weakness.

Treasuries may now get a bid in the coming weeks as

negotiations over automatic budget cuts, scheduled to come into

effect on March 1, come under increasing focus. The cuts, if

implemented, are expected to reduce economic growth, which could

send rates back lower.

'The sequester is the big budget thing going forward,' said

Alan De Rose, head trader of government trading and finance at

Oppenheimer & Co in New York.

'I think the combination of the Fed buying and some of the

headwinds that are going to come from some level of budget cuts

is not going to let rates go up too much,' he added.

Ten-year Treasuries were last yielding 2

percent, at the high end of a recent trading range from around

1.90 percent to 2.03 to 2.04 percent.

Some pressure on Treasuries yields is also likely to abate

after the Treasury this week completed its sale of $72 billion

in new three-year, 10-year and 30-year debt.

Investors also were focused on a meeting in Moscow of

financial officials from the Group of 20 nations on Friday, that

is set to be dominated by the debate over exchange rates. .

At issue is whether the loose monetary and fiscal policies

of the United States, Japan, Britain and the euro zone amount to

strategies of 'competitive devaluation' or currency

manipulations intended to boost exports and growth.

(Editing by Theodore d'Afflisio)

((karen.brettell@thomsonreuters.com)(+1 646 223 6274)(Reuters

Messaging:

karen.brettell.thomsonreuters.com@thomsonreuters.net))

(-------MARKET SNAPSHOT AT 8:58 a.m. EST (1358 GMT)------- Change vs Current Nyk yield Three-month bills 0.1 (+0.00) 0.101 Six-month bills 0.125 (+0.00) 0.127 Two-year note 99-31/32 (-) 0.270 Five-year note 100-01/32 (-03/32) 0.869 10-year note 99-30/32 (-03/32) 2.009 30-year bond 99-03/32 (+7-09/32) 3.173 DOLLAR SWAP SPREADS LAST Change U.S. 2-year dollar swap spread 15.00 (-0.25) U.S. 3-year dollar swap spread 14.25 (unch) U.S. 5-year dollar swap spread 15.00 (-0.25) U.S. 10-year dollar swap spread 6.50 (unch) U.S. 30-year dollar swap spread -15.25 (+1.50))

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