TREASURIES-Bonds gain on worries over pace of recovery

* June home prices rise more than expected

* August consumer confidence also up more than forecast

* 30-year bond regains a good portion of Friday's losses (Adds background on August trade, updates prices)

By Chris Reese

NEW YORK, Aug 31 (Reuters) - U.S. Treasury debt prices rose on Tuesday as persistent worries that the economic recovery is faltering supported investor buying of lower-risk government debt for a second straight day.

Price gains were reined in, however, after reports of a rise in single-family home prices in June and an increase in consumer confidence in August gave a modicum of solace to investors reeling from a recent deluge of somber economic news. Stocks reversed losses and gained slightly.

"There was pretty good follow-through buying (in Treasuries) from yesterday in the overnight session, which gave the market a bid, but the data today has been mixed to modestly on the bond-bearish side," said John Spinello, Treasury bond strategist at Jefferies & Co in New York.

Benchmark 10-year Treasury notes US10YT=RR were trading 16/32 higher in price to yield 2.48 percent, down from 2.54 percent late on Monday, while the 30-year bond US30YT=RR was 30/32 higher to yield 3.54 percent from 3.59 percent.

The move, combined with Monday's price gains, resulted in the 30-year bond having clawed back a good chunk of its losses from Friday, when the long bond suffered its biggest single-day dip in 15 months.

Still, August has proven a banner month for bonds, with benchmark 10-year notes and the 30-year bond on track for the biggest monthly dip in yield since November 2008, when the financial sector was reeling from the Lehman Brothers bankruptcy and the credit crisis reached its peak.

MONTH-END BUYING

Treasuries also got some support on Tuesday from month-end buying by fund managers looking to align the length of maturities in their portfolios to benchmark indices. However, a good portion of month-end buying may have taken place on Monday, Spinello said.

"We have had an amazing rally in two days after getting white-washed on Friday, so I think there are people willing to take profits in front of the extension -- I think a lot of the extension has taken place already," he said.

Treasuries pared early gains after data showing prices of single-family homes gained more than expected in June and rose in the second quarter. They were further pulled back by the rise in consumer confidence in August. For details see [N31237504].

Separately, a dip in a gauge of Midwest business activity in August was not far from expectations.

Investors sold Treasuries on Friday after Federal Reserve Chairman Ben Bernanke did not signal in a speech in Jackson Hole, Wyoming, that any quantitative easing program from the U.S. central bank was immanent.

"The Treasury market is trading higher ... as we have all but gained back the price losses that were created on Friday by the bond version of 'irrational exuberance,'" said Kevin Giddis, president of fixed income capital markets at Morgan Keegan in Memphis, Tennessee.

"Between the economic numbers and a financial slap in the face, traders and investors came back to their senses and realized that we are still in a very slow growth pattern of the economic recovery and consumers and employers are not anxious to do much about it," Giddis said.

Investors are awaiting the release on Tuesday afternoon of minutes from the August 10 Federal Reserve policy-setting meeting, with an eye on how divisive the debate was about how to manage the central bank's balance sheet.

At the end of the meeting the central bank said it would buy Treasuries with funds from maturing mortgage holdings in an effort to hold stable the size of its balance sheet.

Treasuries are also expected to be relatively range-bound as investors look ahead to August non-farm payrolls data, due on Friday. The median of forecasts from analysts polled by Reuters is for a loss of 100,000 jobs in August, after payrolls contracted by 131,000 in July. (Editing by Dan Grebler)