* Republicans propose short-term raise of the debt ceiling * U.S. existing homes sales fall unexpectedly in December * German investor sentiment rises sharply in January By Chris Reese NEW YORK, Jan 22 (Reuters) - U.S. Treasury debt prices were trading little changed on Tuesday as a U.S. Republican proposal for a limited rise in the debt ceiling curbed demand for safe-haven assets. While the proposal to lift the debt ceiling alleviated fears of a U.S. debt default in the next couple of months, investors still expect government wrangling over the budget deficit to hobble consumer confidence and economic growth. Early price losses were pared after data showing an unexpected fall in existing home sales in December sparked some worries over the pace of recovery in the housing market. In Washington, Republican leaders in the House of Representatives said they aim to pass a measure on Wednesday that would allow the government to borrow the money it needs to pay its bills for nearly four months more, to May 19. Investors had worried that fighting over the debt ceiling could force the United States to delay payments on its debt. However, other fiscal deadlines loom, including a March 1 launch of automatic spending cuts and a March 27 expiration of funding for government agencies and programs. "While the threat of an imminent default has been removed, a repeat of the 2011 budget fight could prove destabilizing for the economy and financial markets," said Millan Mulraine, senior economist at TD Securities in New York. "Ultimately, we expect a deal to be reached, but given that both sides continue to dig their heels in, the negotiations are likely to be unnecessarily protracted and unpleasant," Mulraine said. In the meantime, benchmark 10-year Treasury notes on Tuesday were trading 1/32 higher in price with their yield little changed from late Friday at 1.84 percent. The U.S. Treasury market was closed on Monday in observance of Martin Luther King Jr. Day. Treasuries began the day trading lower in price after Germany's ZEW analyst and investor sentiment survey beat expectations in January with a sharp rise for the second month in a row. It was a sign the euro zone crisis is no longer hitting Europe's largest economy as hard as in late 2012. Treasuries prices found some support however from an announcement by the Bank of Japan that its open-ended commitment to buy assets would kick in only next year, disappointing those who expected more aggressive measures. The National Association of Realtors said U.S. existing home sales dropped 1.0 percent last month to a seasonally adjusted annual rate of 4.94 million units. While that was still the second highest rate of sales since November 2009, when a federal tax credit for home buyers was due to expire, it was below the median forecast of a 5.1 million-unit rate in a Reuters poll. "(The) existing home sales number was a little bit of a disappointment. Housing data has been improving over the past several months, but what will be important is the spring buying season. That data will show if this so-called recovery in housing continues," said Jonathan Garber, macro analyst at Briefing.com in Chicago. Thirty-year Treasury bonds were trading 2/32 lower in price with their yields little changed from late Friday at 3.03 percent.