* Boehner's remarks soothe some "fiscal cliff" worries * U.S. to sell $35 billion of new 5-year notes * Fed buys Treasuries in two operations * U.S. new home sales unexpectedly fall in October By Richard Leong NEW YORK, Nov 28 (Reuters) - The absence of progress in Washington in talks to avert a fiscal crisis lifted U.S. government bond prices for a third straight day on Wednesday in advance of a $35 billon auction of five-year federal debt. Bond prices pulled back from earlier highs after U.S. House Speaker John Boehner said he was "optimistic" on reaching a budget deal before the end of the year to avoid a crisis. But the market hung in positive territory given the absence of specifics on how the two major political parties plan to arrive at a compromise on possible tax increases and spending cuts. Worries abound that gridlock between the White House and Congress over the series of automatic tax increases and spending cuts worth $600 billion that could phase in next year may well push the U.S. over what has been dubbed the "fiscal cliff." This outcome could send the economy back into recession and have underpinned safe-haven support for the bond market since the U.S. presidential election three weeks ago. Investors dialed back hopes for a timely budget deal after Senate Majority Leader Harry Reid, a Democrat from Nevada, said on Tuesday he was disappointed there has been "little progress" in the negotiations. "Since his (Reid's) comments, the stock market has gone down and bonds have been popping up," said Thomas Roth, executive director of U.S. government bond trading at Mitsubishi UFJ Securities USA in New York. Boehner's remarks following Reid's dour assessment were similar in tone to what the top Republican lawmaker said earlier. The bond market remained skeptical whether a fiscal deal will be attained before year-end. "There is some more optimism from his (Boehner's) comments, but they still have not agreed on the details on how they will raise more revenues and how they will cut more spending so there's a lot of work to be done," said Sean Incremona, senior economic analyst at 4Cast Ltd in New York. Concerns over the possibility of the "fiscal cliff" kept longer-dated Treasury yields below their 100-day moving averages. Benchmark 10-year Treasury notes last traded 6/32 higher in price with a yield of 1.62 percent, down 2 basis points from late on Tuesday and under its 100-day moving average of 1.6495 percent, according to Reuters data. The 30-year bond was 11/32 higher in price, yielding 2.769 percent, down 2 basis points from Tuesday's close and below its 100-day moving average of 2.7875 percent. U.S. stocks turned higher, erasing earlier losses on Boehner's remarks. They fell to session lows earlier after data showed new single-family home sales fell slightly in October and the government revised sharply lower its estimate for the prior month's sales, denting optimism over one of the brighter sectors of the economy. In the futures and options market, traders were selling volatility on the view that interest rates and bond yields will hold in a tight range until a budget compromise is reached. Given the market's preoccupation with the U.S. budget talks, economic data have taken a back seat as a factor in participants' perceptions about interest rates and Federal Reserve policies. Domestic new home sales unexpectedly fell 0.3 percent in October, with the prior month's gains revised lower. These data reduced optimism about an acceleration in the housing market recovery. Later Wednesday, the Fed will release its Beige Book, an anecdotal view from the Federal Reserve Districts on U.S. economic conditions at 2 p.m. (1900 GMT). On the supply front, the Treasury Department will continue its month-end sales of new short-to-medium-term debt, totaling $99 billion. It will auction $35 billion in five-year notes at 1 p.m. (1800 GMT), following record demand for $35 billion of two-year notes on Tuesday. It will sell $29 billion of seven-year debt on Thursday. In the "when-issued" sector, traders anticipated the upcoming five-year supply to sell at a yield of 0.648 percent , or lower than the yield of 0.774 percent on the five-year notes sold in October. Meanwhile, the Fed will conduct two separate purchases of Treasuries as a part of its "Operation Twist," a program aimed at lowering long-term interest rates to help the economy. It bought $1.85 billion of Treasuries that mature in February 2036 to November 2042 in the first operation. It will later purchase $4.25 billion to $5.25 billion of bonds that mature in November 2018 to November 2020 at 2 p.m. (1900 GMT).