TREASURIES-Prices fall on housing data, Bernanke, supply worry

* Housing sales exceed forecast, hit Treasuries

* Bernanke's recovery talk bearish for government debt

* Supply worries also undermine prices (Adds analyst's quotes, updates prices)

By Chris Reese

NEW YORK, Aug 21 (Reuters) - U.S. Treasuries fell sharply on Friday, with the benchmark note losing more than a full point in price after stronger-than-expected July existing home sales bolstered hopes that the housing market may have bottomed.

Comments from Federal Reserve Chairman Ben Bernanke added to selling pressure. He said the prospects for a return to growth in the near-term appeared good, although the recovery was likely to be "relatively slow." For details see [ID:nWEQ001325].

"There certainly was surprising strength in the existing home sales. There was a predictable reaction in the Treasury market by selling across the curve," said Calvin Sullivan, bond analyst at Morgan Keegan in Memphis, Tennessee.

The 30-year bond lost well over a full point, and the 10-year note also lost a full point in price as investors sold bonds on the signs of an improving economy.

Government securities were also hurt by worries about demand next week for sales of $109 billion of two-, five- and seven-year Treasury notes. Investors are concerned the global appetite for U.S. debt may dwindle.

The combination of the home sales data, concern over upcoming Treasury supply and Bernanke's comments fueled the selling.

"While (Bernanke) played it down, he reiterated the expectations of the economy to return to positive growth. Together, all three of those point toward higher rates," said Mark Freeman , portfolio manager with Westwood Holdings Group in Dallas, Texas.

The benchmark 10-year Treasury note US10YT=RR was trading 1-1/32 lower in price to yield 3.55 percent, up from 3.44 percent late Thursday, while the 30-year bond US30YT=RR was 1-21/32 lower to yield 4.34 percent, up from 4.25 percent.

The National Association of Realtors said sales of previously owned homes in July rose at the fastest pace in nearly two years. Those sales jumped 7.2 percent to an annual rate of 5.24 million units, the highest since August 2007, outpacing market expectations of a 5 million unit pace. [ID:nN21378170].

Two-year Treasury notes US2YT=RR were trading 6/32 lower in price to yield 1.10 percent, up from 1.00 percent late Thursday, while five-year notes US5YT=RR were 20/32 lower to yield 2.56 percent from 2.42 percent. (Additional reporting by Burton Frierson and John Parry; Editing by Dan Grebler)