LONDON Nov 27 (Reuters) - U.S. bond prices took back overnight losses in Europe on Tuesday, as relief faded that Greece will get its next loan tranche, worries over U.S. fiscal challenges resumed and the attraction of safe havens re-asserted itself.
* Greece's international lenders agreed to cut the country's debt by 40 billion euros to reduce it to 124 percent by 2020. The deal paves the way for the release of further aid to Athens, removing the risk of near-terms default.
* The relief did not cause major damage to safe-haven assets, however. The risk of recession-inducing, mandatorytax hikes and spending cuts kicking in next year in the United States was still providing support.
* U.S. 10-year yields were last 1.2 basis points lower on the day at 1.6540 percent, off highs of just below 1.68 percent hit in the Asian session.
* "There was some relief following the deal, but it was brief as the outcome was expected, and I guess we're now focusing on the other deal that needs to be reached this year (the budget deal in the U.S.)," one trader said.
* Analysts said the limited reaction was also caused by scepticism that the measures to cut Greek debt would work. The most immediate risk was that investors may not want to take part in a debt buy-back that needs to be completed before the International Monetary Fund can release its share of aid.
* "The market is still mulling over the details," RIA Capital Markets strategist Nick Stamenkovic said. "It is taking a bit of a wait-and-see stance,
* Later on Tuesday, the U.S. Treasury Department will offer $35 billion of two-year notes, as part of this week's $99 billion in debt sales. It will be followed by $35 billion of five-year notes on Wednesday and $29 billion of seven-year notes on Thursday.