LONDON, Nov 26 (Reuters) - U.S. Treasury prices rose on Monday, recovering from losses last week, as fiscal challenges in the United States and political uncertainty in Spain underpinned appetite for safe-haven assets. * Ten-year U.S. Treasury yields fell 2.9 basis points to 1.66 percent, having risen as far as 1.70 percent on Friday. * U.S. Treasury futures fell last week in holiday-thinned trading after lawmakers in Washington sounded confident that a deal could be reached to avert the "fiscal cliff" of spending cuts and tax hikes - due to take effect in early 2013. By Monday, that confidence seemed to have waned somewhat. * "Markets are nervous (that) we might not get an agreement before year end," said Nick Stamenkovic, bond strategist at RIA Capital Markets. "The time for achieving a compromise is not long. I think this issue will continue to move Treasuries around in a choppy session at least near term." * Stamenkovic, however, added that Treasuries did not offer great value over the medium term and expected yields to rise over the next three to six months. * One trader said he continued to favour either being flat or long - having buying positions - on U.S. Treasuries. * "I would be a buyer of Treasuries on a dip. That's what works," said the trader. * The victory of separatists in regional elections in Catalonia on Sunday was another source of uncertainty for riskier assets, the trader said, although Spanish yields showed limited reaction to the outcome. * "You couple that with Greece - we will get a conclusion on Greece (but) it will be another fudge - I think that says bonds are better bid." * Euro zone finance ministers and the International Monetary Fund will seek to unfreeze the second bailout package for Greece on Monday, but they first need to agree if some of the official loans to Athens might eventually be forgiven to cut Greek debt. * Five-year U.S. Treasury yields fell 1.4 basis points to 0.68 percent, while 30-year yields shed 2.8 bps to 2.80 percent. * Bond prices rose even though the market faces $99 billion of supply this week. The U.S. Treasury Department will sell $35 billion of two-year notes on Tuesday, $35 billion of five-year notes on Wednesday and $29 billion of seven-year notes on Thursday.