TREASURIES-Edge up in Asia on bargain hunting, auction eyed

TOKYO, Oct 27 (Reuters) - U.S. Treasuries edged up in Asia on Tuesday led by bargain hunting after the benchmark yield hit a two-month high the previous day, but gains in prices were limited due to caution before a two-year Treasury note auction.

* Falls in Asian shares added support for the U.S. government debt market, with Tokyo's Nikkei average .N225 slipping 1.5 percent and the MSCI index of Asia stocks excluding Japan .MSCIAPJ down 1.1 percent. U.S. stock futures SPc1 DJc1 were also down, indicating a weak start on Wall Street later in the day.

* Growing speculation that the Federal Reserve may signal tighter policy down the road have led to a bond sell-off. An actual interest rate increase by the Fed has still a way to go, but the market is keen to know whether there will be any changes in the Fed's statement at its policy meeting next week, dealers said.

* "Treasury market sentiment is expected to stay weak this week on speculation about the U.S. exit strategy debate and U.S. economic growth data, which is likely to show the economy is on a recovery path," said Yasutoshi Nagai, chief economist at Daiwa Securities SMBC.

* U.S. third-quarter gross domestic product data is due on Thursday and economists forecast a 3.3 percent expansion from a 0.7 percent contraction the previous quarter. [ID:nN26185389]

* The U.S. Treasury will offer $44 billion of two-year notes on Tuesday, followed by $41 billion in five-year debt on Wednesday and $31 billion in seven-year notes on Thursday. [ID:nN22432166]

* T-note futures edged up 2.5/32 to 117-05/32 TYv1 and benchmark 10-year notes inched higher 2/32 in price to yield 3.547 percent US10YT=RR, down about one basis point from late U.S. trade on Monday.

* Thirty-year bonds rose 2/32 in price to yield 4.359 percent US30YT=RR, while and two-year notes were steady in price to yield 1.021 percent US2YT=RR.

* For market incentives later on Tuesday, the S&P Case/Shiller home price index for August due at 1300 GMT is expected to show a rise of 0.7 percent after a 1.6 percent rise the previous month. The Conference Board's report on consumer confidence for October, due at 1400 GMT, is forecast to show a reading of 53.1, unchanged from September. ECONUS (Reporting by Kaori Kaneko)