TREASURIES-US bonds rally on Greece, Portugal debt problems
* Greece, Portugal downgrades boost safe-haven USTs
* Bonds gain despite looming $44 bln 2-year auction
* Rally may temper bidding at auction (Updates after Greece, Portugal downgrades, adds analyst quote, byline)
NEW YORK, April 27 (Reuters) - U.S. government bonds vaulted higher on Tuesday as the fiscal crisis in troubled euro zone countries sent global investors into the safe-haven embrace of Treasuries.
Standard & Poor's cut Greece's sovereign credit ratings to "junk" status and also downgraded Portugal, leading investors to opt for the traditional safe harbor of Treasuries. [ID:nLDE63P0LU]
"The situation in Europe just seems to be getting more problematic by the day," said Carl Lantz, U.S. interest rate strategist at Credit Suisse in New York.
"It has created more of a flight-to-quality bid in Treasuries."
Though the United States has suffered its own rising tide of red ink it has benefited from the decades-old perception that Treasuries are safe. Recent indications that debt issuance may have peaked have also helped.
The sharp bond-market gains came despite a looming U.S. Treasury auction that will swamp the market with $44 billion in two-year debt.
The benchmark 10-year note US10YT=RR rose a point on the day and was last up 31/32 in price yielding 3.69 percent versus Monday's close of 3.81 percent.
At its highs, the 30-year long bond US30YT=RR was up nearly two points on the day and was last up 1-22/32, yielding 4.56 percent versus Monday's close of 4.67 percent.
Yields on two-year notes fell below 1.0 percent, a level seen key to attracting bidders at the 1 p.m. auction. Two-year notes US2YT=RR were last up 5/32 in price, yielding 0.97 percent.
(Reporting by Burton Frierson, Editing by Chizu Nomiyama)
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