TREASURIES-Strong economic data dents demand for govt debt

* Losses widen on stronger-than-expected economic data

* Oct ISM manufacturing, Sept construction spending rise

* Sept pending home sales higher than forecast

* Stock gains damp desire for safe-haven government debt

* Market focused on mid-week Fed meeting

NEW YORK, Nov 2 - U.S. Treasuries expanded early losses on Monday when stronger-than-expected data on manufacturing, construction and home sales pushed stocks higher and dented demand for safe-haven U.S. government debt.

The market reaction to the stronger-than-expected economic data was short-lived, however, because investors are looking ahead to other key data due this week and to what the Federal Reserve will say on Wednesday at the conclusion of the Federal Open Market Committee's two-day monetary policy meeting.

"We've had a reversal of some of last week's gains in Treasuries and a reversal of some of last week's losses in equities," said John Canavan, market analyst at Stone & McCarthy Research Associates in Princeton, New Jersey.

The benchmark U.S. 10-year note US10YT=RR, down 7/32 in early dealings, expanded its loss to 16/32 after the release of data on U.S. manufacturing, construction and pending home sales. But it subsequently erased much of the loss and yielded 3.41 percent, up from 3.39 percent on Friday.

The 30-year bond US30YT=RR, briefly down a full point, was off 13/32 just before midday, its yield at 4.25 percent, up from 4.23 percent on Friday.

"Prices initially fell on the stronger-than-expected ISM construction and pending sales figures but quickly rebounded," Canavan said.

He said the market was focused on economic data yet to come this week, including non-farm payrolls on Friday, and details of the Treasury's fourth-quarter refinancing, to be announced later on Monday, and on the Fed's policy meeting.

FED STATEMENT KEY

Market analysts will put the Fed statement under a microscope on Wednesday.

At issue is whether more hawkish members of the Federal Open Market Committee, the Fed's policy arm, will manage to make the Fed statement slightly less dovish by removing the word "extended" from the Fed's current commitment to keep interest rates low for an extended period.

The Fed's support for the economy through the crisis -- by cutting benchmark rates to near zero and expanding its balance sheet through lending and asset purchases -- has caused some policymakers to worry that inflation might come back when a recovery finally takes hold.

Others, such as Fed Vice Chairman Donald Kohn, maintain that with unemployment likely to go above 10 percent and many U.S. factories idle, the greatest risk to the outlook is a loss of momentum, not inflation.

The Fed's statement could retain the "extended period" phrase or go back to the language it had earlier in January, which was just to keep rates low without specifying for an extended period, analysts said.

In the latter case, they said, the Fed would try to emphasize that removing the word "extended" did not imply a rate hike at the December meeting or any time soon.

Two-year notes US2YT=RR, which tend to be sensitive to prospective changes in Fed policy, were off 2/32, their yields rising to 0.94 percent from 0.90 percent late on Friday.

ECONOMIC OUTLOOK

The market is trying to assess the prospective character of the economic recovery. On Monday, the data appeared to point toward a healthy one.

The good news on the economy included the Institute for Supply Management's factory index, which showed U.S. manufacturing grew for the third straight month.

The National Association of Realtors said pending sales of previously owned U.S. homes unexpectedly rose in September to the highest level in nearly three years.

U.S. construction spending made its largest gain in a year in September, aided by a big rise in private residential building and a record pace of public construction, the government said.

"Time will tell whether we will have a V-shaped recovery or not, but the data today do tend to rule out a W-shaped recovery or new recession," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.