TREASURIES-Prices rise as data casts doubt on recovery

* Home sales fell in January - Natl Assoc of Realtors

* Consumer sentiment fell in Feb - Thomson/Reuters-U Mich

* Volume depressed as huge blizzard covers northeast U.S. (Adds analyst's quotes, updates prices)

By Chris Reese

NEW YORK, Feb 26 (Reuters) - U.S. Treasuries rose on Friday after news that home sales fell in January and consumer sentiment slipped in February reinforced expectations for subdued economic growth this year.

Trading volume was depressed, however, as a winter storm covered the northeastern United States in deep snow.

Friday's price gains capped a week of strong performance for Treasuries as a string of weaker-than-expected economic data, including a surprise jump in new jobless claims and plunging consumer confidence, had investors scrambling for the safety of lower-risk government debt.

Benchmark 10-year notes were on track for their biggest weekly dip in yield in five months.

"We are getting a little more concerned about growth in 2010, some of the data are suggesting that after the big inventory pop in the fourth quarter (of 2009) that things are not looking too hot for the recovery," said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco.

Benchmark 10-year notes US10YT=RR traded 6/32 higher in price to yield 3.61 percent, the lowest in more than two weeks and down from 3.63 percent late on Thursday.

The market got a batch of economic reports on Friday, including February consumer sentiment, fourth quarter gross domestic product, February business activity in the U.S. Midwest and January home sales. For details see [ID:nN26169261].

Sales of previously owned homes in the United States unexpectedly plunged 7.2 percent in January, fresh evidence the housing market has yet to find stable ground, though compared with a year ago, sales were up 11.5 percent.

"The biggest disappointment was the existing home sales data which raised doubts about whether we have a self-sustaining recovery in housing," said William Sullivan, chief economist at JVB Financial Group, from his home in Bridgewater, New Jersey, where the snow was 17 inches deep.

Sullivan said severe winter weather that stalled most public transportation in areas surrounding New York City damped market activity.

Month-end window-dressing also contributed to the upward bias in Treasuries on Friday afternoon, Sullivan said.

The Thomson/Reuters-University of Michigan consumer sentiment report for February was weaker, which was negative for the economy and, thus, positive for bonds which thrive when investors need a haven from economic uncertainty.

"The rebound in business activity will not last long if consumers can't provide support," said Alan Gayle, investment strategist at Ridgeworth Investments in Richmond, Virginia.

The government said the U.S. economy expanded at a brisker, 5.9 percent pace than first thought in the final quarter of 2009 as businesses drew down inventories at a much slower pace and boosted investment. The economy expanded at a 2.2 percent annual rate in the third quarter.

The report had no visible impact on Treasury prices.

Reports that business activity in the U.S. midwest expanded in January and that business in New York City grew in February also left Treasuries unmoved.

Adding to the supportive tone for Treasuries this week was testimony from Federal Reserve Chairman Ben Bernanke in which he restated he expects the central bank to maintain interest rates at ultra-low levels for an extended period of time.

In afternoon trade, two-year Treasury notes US2YT=RR traded unchanged in price to yield 0.82 percent, while thirty-year bonds US30YT=RR were up 12/32, with yields easing to 4.55 percent from 4.58 percent.

The Treasury auctioned a record-large $126 billion of debt this week, with the sales generally pointing to continued appetite for the massive doses of U.S. government debt. (Additional reporting by Ellen Freilich: Editing by Diane Craft)