February 26, 2014 / 5:55 PM / 3 years ago

TREASURIES-Prices little changed as new-home sales data erases gains

* Strong new-home sales data puts pressure on yields

* Chinese yuan stabilizes after drops, capping bond buys

* Fed bought $1.25 bln in treasuries maturing 2038 to 2043

By Marina Lopes

NEW YORK, Feb 26 (Reuters) - U.S. Treasury debt prices were flat on Wednesday, erasing earlier gains after better-than-expected data on the sale of new homes.

The U.S. government bond market enjoyed a brief safe-haven rally after Russian President Vladimir Putin put combat troops on high alert for war games near Ukraine, following the toppling of its ally Viktor Yanukovich as president, traders said.

"That unrest is going to create a flight to quality bid, but until you have something more definite, prices are going to remain range bound," said Dimitri Delis, a fixed income strategist at BMO Capital Markets in Chicago.

U.S. single-family home sales surged to a 5-1/2-year high in January, surprising analysts after last week's data showed housing starts fell their most in nearly three years due to severe winter weather.

Benchmark 10-year yields bounced off lows of 2.6816 percent just as the data was released, their lowest levels in one week, but have since rebounded to 2.70 percent.

Benchmark 10-year note yields have held between 2.65 percent and 2.78 percent for the past two weeks and traders see the debt as unlikely to move out of that range until there is fresh information about the health of the economy.

Ten-year notes were unchanged in price, with yields at 2.701, Thirty-year-yields were up 4/32 in price, sending yields down to 3.654 percent from Tuesday's close of 3.661 percent.

Traders await both a two-year floating rate note auction and a five-year note auction, due later in the day.

The Fed bought $1.25 billion in treasuries maturing between 2038 and 2043 as part of its continuing bond buying program.

Volumes were low overnight, but investors closely monitored China's yuan, which has shed more than 1.5 percent since mid January, as the central bank urges state-owned banks to sell its currency.

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