TREASURIES-US yields reverse losses after auction, Fed minutes

(Recasts, updates yields; adds results of 10-year auction, Fed minutes, fresh quote throughout)

WASHINGTON, Oct 8 (Reuters) - U.S. Treasury yields turned positive on Wednesday afternoon, with investors showing tepid demand at an auction of 10-year notes and minutes from last month's central bank meeting holding few surprises.

Amid a government shutdown that has silenced official economic indicators and with baked-in market expectations for successive Federal Reserve rate cuts in the remainder of the year, analysts see little reason for U.S. yields to awaken from their recent range-bound trading pattern.

Wednesday's $39 billion auction of ten-year notes saw declines in the bid-to-cover ratio and purchases by indirect accounts, pointing to less-than-stellar investor appetite.

Meanwhile the minutes from the September meeting of the Federal Open Market Committee showed most favored easing policy again this year.

"It wasn't a weak auction, it was just not great," said Lou Brien of DRW Trading. "I termed it slightly to the poor side."

The longer markets go without the federal government's economic data, the harder it becomes for investors to place bets, he added.

"The further you go without any economic data, the more of a mystery the economy becomes," said Brien.

The yield on the benchmark U.S. 10-year Treasury note was last up 0.6 basis points to 4.133%. The yield on the 30-year bond rose 0.1 basis points to 4.727%.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 54.5 basis points.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations for the Fed, rose 1.4 basis points to 3.586%.

The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.433% after closing at 2.42% on October 7.

The 10-year TIPS breakeven rate was last at 2.364%, indicating the market sees inflation averaging about 2.4% a year for the next decade. (Reporting by Douglas Gillison in Washington; Editing by Sharon Singleton and Diane Craft)