TREASURIES-US bonds slide ahead of heavy supply; FOMC in focus this week

* Heavy Treasury supply prompts investor selling, tests demand

* Investors also worried about US-Iran stalemate

* J.P. Morgan expects Fed to hold rates through H1 2027

By Gertrude Chavez-Dreyfuss

NEW YORK, April 27 (Reuters) - U.S. Treasuries fell on Monday as investors sold them ahead of a wave of issuance on the front end of the curve that is expected to once again test demand for the country's government debt.

Investors are also watching closely a diplomatic stalemate, as negotiations aimed at ending the Middle East conflict show little sign of progress.

Iranian sources disclosed Tehran's latest proposal on Monday, which would defer talks of Iran's nuclear program until hostilities cease and disputes over shipping from the Gulf are resolved. That is unlikely to satisfy Washington, which says nuclear issues must be addressed from the outset.

Those geopolitical uncertainties are unfolding alongside heavy near-term Treasury supply. Ahead of bill and note auctions, investors often sell Treasuries to push yields higher before buying them back at lower prices once new supply is absorbed - a process known in the market as building a concession.

FED MEETING

Heavy issuance, however, can expose weak demand, analysts said, leading to weaker-than-expected auctions and further price declines. Investors holding Treasuries into auctions face mark-to-market volatility, especially on the front end.

On tap on Monday are $166 billion in U.S. 13-week and 26-week bill auctions and the sale of $139 billion in two-year and five-year notes.

"We have a lot of supply on the front end and the market is trying to digest that," said Tom di Galoma, managing director for global rates trading at Mischler Financial. "It's too much supply given that it's a Monday and people are probably not set up for it."

In late morning trading, the benchmark 10-year Treasury yield rose 1.2 basis points to 4.322%. Last Friday, the yield posted its biggest weekly increase since mid-March.

U.S. 30-year yields were up 1.3 bps at 4.929%.

At the shorter end of the curve, U.S. two-year yields, which reflect interest rate expectations, climbed 19 bps to 3.795% . They also had the largest weekly increase since March 16.

After the auctions, the focus will be on the Federal Open Market Committee meeting, which ends on Wednesday. This would be Jerome Powell's last scheduled meeting as chair.

J.P. Morgan said in a research note it expected the Fed to remain on hold through the first half of 2027, noting that money markets are pricing in a Fed pause as well until deep into next year. The U.S. bank said it sees some risk of Fed tightening in the second half of 2027. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Alison Williams)