* 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.