TREASURIES-U.S. 10-yr notes dip but growth concerns support

* Ten-year notes dipped 3/32 in price to yield 1.725 percent , up 1 basis point on the day. On Monday, the 10-year yield dipped to as low as 1.706 percent, its lowest level since Sept. 12.

* Treasuries had rallied on Monday after data showed that German business sentiment dropped for a fifth straight month in September, raising fears the euro zone's largest economy may be headed for a contraction in the third quarter.

* With its decline on Monday, the 10-year Treasury yield erased all of the initial rise that took place after the U.S. Federal Reserve announced aggressive monetary stimulus, known as QE3, on Sept. 13 to promote economic recovery.

* "Just because QE3 was launched, it doesn't mean that economic conditions will improve straight away," said a trader for a U.S. brokerage house in Tokyo.

"I think (10-year) yields are more likely to drop rather than rise for now. Although there are auctions coming up, they are in shorter maturities and probably won't trigger too much selling in longer-term maturities," he added.

* Still, the trader said he was wary of buying Treasuries too aggressively ahead of the quarter-end, when many financial institutions and investors close their books. In addition, market positioning appears fairly neutral, reducing the likelihood of very sharp moves, he said.

"I don't think there are too many big long positions or short positions in the Treasury market right now. We probably won't see major moves until positions pile up a little more," the trader said.

* The U.S. Treasury Department is due to auction two-year notes later on Tuesday, followed by sales of five-year and seven-year notes later in the week.