* Prices gain as U.S. spending cuts loom * Month-end extension buying seen adding bond bid * Treasury to auction $29 billion seven-year notes * Fed to buy $4.25 billion to $5.25 billion debt due 2017 By Karen Brettell NEW YORK, Feb 27 U.S Treasuries gained in price on Wednesday and benchmark yields traded near their lowest levels in a month as concern over the effect of government spending cuts on U.S. economic growth boosted demand for safe-haven debt. Political uncertainty in Italy and demand for bonds as investors readjust bond portfolios for month-end added to the bond rally. "It may be month-end extensions, or fear of sequestration, but the market has a very strong bid to it," said Charles Comiskey, head of Treasuries trading at Bank of Nova Scotia in New York. Automatic, across the board spending cuts will come into force on Friday unless lawmakers agree on other measures to help reduce the U.S. deficit. Benchmark 10-year Treasuries gained 11/32 in price to yield 1.85 percent, down from 1.89 percent late on Tuesday. The notes have rallied from yields of around 2 percent last week. Traders said the notes may next test resistance at around 1.82 percent. Thirty-year Treasuries bonds gained 24/32 in price to yield 3.04 percent, down from 3.08 percent late on Tuesday. Treasuries gained even after data showed a jump in durable goods orders, excluding aircraft. The government also will auction $29 billion in seven-year notes later on Wednesday, the final sale of $99 billion in new debt this week. Bonds were further boosted after Federal Reserve Chairman Ben Bernanke on Tuesday strongly defended the U.S. central bank's bond purchase program. The Fed will purchase between $4.25 billion and $5.25 billion in debt due 2017 on Wednesday as part of this ongoing quantitative easing meant to help stimulate the economy and reduce the jobless rate.