* Gauge of business spending plans unexpectedly rises * 10-year yield breaks above 2 pct, first time since April * Treasury sells 2-year notes at a high yield of 0.288 pct By Luciana Lopez NEW YORK, Jan 28 U.S. Treasuries prices dropped on Monday after a gauge of planned U.S. business spending rose in December and investors pushed for price concessions going into debt auctions this week. The Commerce Department said on Monday non-defense capital goods orders excluding aircraft, a closely watched proxy for investment plans, edged higher in December by 0.2 percent where the market had expected a small drop. "Net-net this report actually winds up being modestly better from a GDP perspective," said Tom Porcelli, chief U.S. economist at RBC Global Markets in New York. But he cautioned that milestones later in the week - including a Federal Reserve policy meeting and key U.S. jobs data - could keep investors wary. "You're not going to want to be a hero here on Monday, not with two major events still ahead of us," Porcelli said. Data showing contracts to buy previously owned U.S. homes unexpectedly fell in December took the edge off losses. The National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, dropped 4.3 percent to 101.7. The benchmark 10-year note was trading 8/32 lower in price to yield 1.98 percent, up from 1.95 percent late Friday. The yield pierced 2 percent early in the session for the first time since last April. The 30-year bond was last off 13/32 to yield 3.15 percent from 3.13 percent late Friday. The Treasury kicked off this week's debt supply with $35 billion in two-year notes on Monday. It will sell $35 billion in five-year notes on Tuesday and $29 billion in seven-year notes on Wednesday. The Treasury sold the two-year notes at a high yield of 0.288 percent, and with a bid-to-cover ratio of 3.77 . Treasury debt prices traded steady at lower levels after the auction. On Wednesday the Federal Reserve caps a two-day policy meeting. The statement will be scrutinized for signs of whether the central bank is mulling ending its latest bond purchase program this year. Minutes from the Fed's December meeting, released on Jan. 3, showed that some voting members of the Fed's policy committee opposed continuing bond buybacks, sparking speculation that the central bank may end its latest round of quantitative easing before year-end. On Friday, the Labor Department's monthly nonfarm payrolls data could help clarify the state of the U.S. jobs market, which policymakers have said is a key gauge of the recovery in the world's biggest economy. "Policy seems to be on autopilot until the unemployment rate gets to 6.5 percent," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. The jobless rate was 7.8 percent in December. Treasuries sold off last week partly on news that European banks planned to repay more emergency loans than expected, suggesting the region's banking sector was on the mend and cooling demand for lower risk debt.