REFILE-TREASURIES-Bonds rally, helped by weakening economy

* Boost from report confirming U.S. economy contracting

* Treasuries briefly pare gains on Fed aid program

* Five-year auction awaited (Refiles to align table)

By John Parry

NEW YORK, Nov 25 (Reuters) - U.S. Treasury debt prices rallied on Tuesday after a government report confirmed the economy contracted and inflation pressures eased in the third quarter, reinforcing the impression that a recession is under way.

Investors have been flocking to the safety of bonds as the economic warning signs flash red in the fourth quarter: U.S. home prices continue to fall, consumer spending drops and the worst lending crunch in decades takes its toll.

The benchmark 10-year note yield fell back within towards its 2.99 percent five-decade low hit last week.

The benchmark 10-year Treasury note's price, which moves inversely to its yield, rose 1-21/32 for a yield of 3.14 percent US10YT=RR, versus 3.33 percent late Monday.

In addition, the Fed announcement that it would buy mortgage-related assets drove the prices of these assets higher, at the same time lifting the price of longer-dated government bonds, said Sean Murphy, Treasury trader with RBC Capital Markets in New York.

The Federal Reserve said it would buy housing-related securities with a $600 billion program and also set up a $200 billion facility to buy consumer debt securities.

The steps should help unblock credit markets and diminish the appeal of safe-haven U.S. government securities over time, analysts said.

"Here is the Fed taking a bunch of debt out of the market, which doesn't hurt. I think it should it should help unblock the credit markets," said Scott Brown, chief economist with Raymond James & Associates in St Petersburg, Florida. "There may be less of a flight to safety in Treasuries," he added.

The 2-year Treasury note yielded 1.22 percent US2YT=RR, versus 1.21 percent late Monday.

Investors were also awaiting a $26 billion sale of five-year notes, after Monday's record $36 billion auction of two-year notes drew tepid demand.

Another poor result could intensify doubts about the government's ability to refinance its programs to rescue ailing banks and automakers.

The 30-year Treasury bond gained more than 3 full points in price for a yield of 3.60 percent US30YT=RR, versus 3.78 percent late Monday. (Reporting by John Parry; Editing by Tom Hals)