-->By Heather Bandur

Tokyo, April 28 (Bloomberg) -- Investors may be less willing to buy Treasuries this week on expectations the U.S. government will announce plans to sell a record amount of debt at its quarterly auction, according to Ried, Thunberg & Co.

Speculation the government will offer more than $60 billion of three-, five- and 10-year notes may drive benchmark note prices down for the first week in three, investors said. The Treasury will announce the size of the sale on Wednesday.

''That's a lot for the bond market to swallow,'' said Steven Bohlin, who handles $2 billion at Thornburg Investment Management in Sante Fe, New Mexico. He has been putting new funds into cash with the intention of investing in higher-yielding company debt.

Ried, Thunberg's sentiment index fell to 51 from 53 a week earlier, a sign investors are less optimistic Treasuries will gain by the end of June. A number closer to 100 indicates more optimism toward bonds, while nearer to 1 suggests more pessimism. The 52 money managers polled by the Westport, Connecticut-based research firm manage a combined $1.73 billion.

Sluggish economic growth and falling stocks have reduced federal tax revenue at the same time a tax-cut plan by the Bush administration and the war in Iraq ramped up government spending, leading to a second straight budget deficit.

The White House estimates the budget gap will reach $304 billion this year and $307 billion in 2004, up from $158 billion last year. The U.S. posted a record $237 billion surplus in 2000.

''Deficits aren't anything like we've seen in our recent experience, and that's going to pose quite a bit of risk to the market -- yields will likely go higher,'' said Christopher Sullivan, who helps manage $2 billion in fixed-income assets at the United Nations Federal Credit Union, which provides financial services to UN staff and their families.

Growth, Fed Outlook

Sullivan, who participated in the survey, sold 10-year notes last week when their yields reached 3.92 percent.

Treasuries rose last week after a government report showed the economy expanded 1.6 percent last quarter, less than the 2.4 percent median forecast of economists surveyed by Bloomberg News.

The benchmark 3 7/8 percent note maturing in 2013 rose about 1/2 in the week, or $5 per $1,000 face amount, to 99 7/8, according to Cantor Fitzgerald LP. Its yield fell 7 basis points to 3.89 percent, the lowest since April 1. A basis point is 0.01 percentage point.

Growth will accelerate 1.9 percent in the second quarter, according to investors in the Ried, Thunberg survey. By the end of the year, it will expand 2.7 percent.

Ninety-six percent of those surveyed said the Federal Reserve would leave its benchmark interest rate unchanged at a 41-year low of 1.25 percent at its May 6 meeting, compared with 86 percent last week.

Job Market

The economy lost 262,000 jobs last quarter, including 108,000 in March. Claims for state unemployment benefits in the week ended April 19 rose to the highest in a year, raising concern among investors that Friday's employment report will show the economy lost jobs for a third straight month.

Economists surveyed by Bloomberg forecast a 50,000 decline.

''Weekly claims of over 400,000 is generally associated with job losses,'' said Michael Mullaney, who manages $10 billion in stocks and bonds at Fiduciary Trust Co. in Boston. Like Thornburg's Bohlin, Mullaney is buying corporate bonds for their higher yields over Treasuries.

The average investment-grade corporate bond yielded 1.35 percentage points more than the 10-year Treasury on Thursday, according to Merrill Lynch & Co. The premium has narrowed about a half-percentage point this year.

'Flush With Treasuries'

Money managers surveyed by Ried, Thunberg increased their allocation of corporate bonds last week to 30 percent from 25 percent a week earlier, the survey showed. At the same time, they boosted their holdings of Treasuries to 38 percent from 34 percent.

''Everybody is flush with Treasuries right now,'' Mullaney said. ''I don't see people knocking each other over to get a hold of a Treasury'' security, he said.

The Treasury Department is likely to announce it will offer as much as $68 billion of notes in the debt sales May 6-8, said John Canavan, a strategist at Stone & McCarthy, a research firm in Princeton, New Jersey. The government may sell $24 billion of three-year notes, $24 billion of five-year notes and $20 billion of 10-year notes, he said. It would be the first time the Treasury sold a three-year security since 1998.

''There will probably be pretty good demand for the three- year note, especially from people who are looking for an alternative to what's already out there,'' said Mario DeRose, a fixed-income strategist at Edward Jones & Co. in St. Louis.

Confidence, ISM

Off-the-run, or previously sold, Treasuries with three years left to maturity yield as much as 95 basis points above the Fed's target, compared with 36 basis points for the most actively traded two-year note.

In addition to the employment report, statistics on consumer confidence for April and the Institute for Supply Management's factory index are slated for release this week. The Conference Board's confidence index probably rose to 70 in April from 62.5 in March, according to a survey of economists by Bloomberg News. March's reading was the lowest in almost a decade.

ISM's manufacturing index will likely register 47 this month, compared with 46.2 in March, economists forecast. A reading below 50 means business is contracting.