TREASURIES-Prices gain modestly on worries over fiscal crisis
* U.S. budget concerns underpin bids for bonds * U.S. sells $35 billion in new two-year notes * Traders shrug off U.S. durables, consumer data By Chris Reese NEW YORK, Nov 27 (Reuters) - U.S. Treasury debt prices rose for a second day on Tuesday as persistent worries over the lack of progress in negotiations in Washington to avert a fiscal crisis drove safe-haven bidding for U.S. government debt. Gains were limited however, with investors reluctant to push prices significantly higher while the government sells $99 billion of new debt this week, and yields held near the middle of a range dating back to early August. If President Barack Obama and federal lawmakers cannot reach a budget compromise, a series of automatic tax hikes and spending cuts will begin in early 2013 that may reduce the budget deficit, but also could tip the world's biggest economy back into recession. Fears of a fiscal crisis bolstered lower-risk Treasuries, and benchmark 10-year notes traded 7/32 higher in price to yield 1.64 percent, down from 1.67 percent late Monday. The yield is only a few basis points off the middle of a range of 1.54 to 1.89 percent that has held since early August. The bond market retraced overnight losses linked to news that international lenders agreed to a debt relief deal for Greece to obtain more financial aid to avoid a messy default. Analysts said the early selloff in bonds faded when traders grew skeptical over the lack of details on how Greece will carry out budget reforms needed to meet its new debt targets. "Today's (economic) data and Greek aid package had minimal impact on the market with Treasuries continuing to be stuck in very tight ranges," said Justin Lederer, Treasury strategist at Cantor Fitzgerald in New York. "The most notable market action was the small up-tick mid-morning with equities trading into the red and the Fed's $1.9 billion, 10-to-20 year sector purchase." Much of the day's trading was short-term plays driven by this week's Fed purchases of longer-dated debt and the government's auctions of $99 billion in short-to-medium-term supply, analysts said. The Treasury sold $35 billion of two-year notes on Tuesday with solid bidding producing a high yield of 0.27 percent. The Treasury Department will sell $35 billion in five-year notes on Wednesday and $29 billion in seven-year debt on Thursday. Meanwhile, the Federal Reserve bought $1.9 billion in Treasuries due in February 2023 through May 2030 as part of its Operation Twist stimulus program. The U.S. central bank could buy up to $15 billion in federal debt the rest of the week in four more rounds of Operation Twist purchases. Uneasiness over a possible fiscal crisis overshadowed somewhat better-than-expected data on the U.S. economy. Many economists played down the significance of the numbers since some indicators were measured before superstorm Sandy pummeled the Northeastern United States a month ago, disrupting business. Durable orders came in unchanged in October, less weak than a 0.6 percent fall predicted by economists. Home prices in 20 major U.S. cities grew 0.4 percent in September, reinforcing the view of an improving real estate sector, the Standard & Poor's/Case-Shiller report showed, while the Conference Board said Americans' optimism on the economy rose to its highest in more than four years in November. Portfolio adjustments related to corporate debt issuance also supported the Treasuries market, said Rick Klingman, managing director of Treasury trading at BNP Paribas in New York. "We have numerous corporate deals that are pricing this afternoon and a lot of them are swapped, so that is bringing some buying into Treasuries," he said. Thirty-year bonds traded 10/32 higher in price to yield 2.79 percent, down slightly from 2.80 percent Monday.