* Treasury sells $35 bln in 5-year notes, high yield 1.300
* U.S. ex-auto retail sales grew modestly in August
* U.S. home prices posted best yearly gain in over 7 years
* Fed to begin two-day meeting, analysts see no surprises
By Luciana Lopez and Richard Leong
NEW YORK, Oct 29 (Reuters) - Prices for U.S. Treasuries were
little changed on Tuesday as mixed data underscored uncertain
prospects for the economy, with yields close to a three-month
low as investors sought direction.
Light trading volumes suggested traders were reluctant to
make big bets as the Federal Reserve began a two-day policy
meeting on Tuesday.
A sale of $35 billion in 5-year notes saw decent if
unspectacular demand, with a high yield of 1.300 percent and a
bid-to-cover ratio of 2.65.
The sale followed a well-received auction of 2-year debt on
Monday. The Treasury will complete this week's coupon debt
offering on Wednesday with a $29 billion sale of new seven-year
Benchmark yields have been stuck in a narrow 7 basis point
range after they fell to a three-month low of 2.471 percent last
Wednesday in the wake of a disappointing September jobs report.
"The market is directionless. There is no urgency to push
yields higher or lower," said Lou Brien, a market strategist at
DRW Trading in Chicago.
Economic data did little to point the way for investors.
While an a S&P/Case-Shiller report showed the biggest
year-over-year home price increase in seven years, consumer
confidence sagged badly in October.
And the Commerce Department said a hefty drop in car demand
led to a surprise 0.1 percent dip in retail sales in September.
The Federal Reserve meeting that concludes on Wednesday
could continue the status quo.
The Federal Open Market Committee, the central bank's
policy-setting group, will probably maintain their current pace
of bond-buying in a bid to prop up the economy after a federal
government shutdown earlier this month, which dragged on the
world's biggest economy.
"The FOMC statement will be purposely bland," said Jim
Vogel, an interest rates strategist with FTN Financial in
The impasse in Congress that led to the shutdown highlighted
the political risk overshadowing markets now, a worry that could
make the Fed reluctant to pull back now.
"It's going to be hard for the Fed to do much of anything
other than what they're doing until March of next year, maybe
even April of next year," said Kevin Giddis, head of fixed
income capital markets at Raymond James in Memphis, Tennessee.
The effects of a divided Congress, he said, "are a lot more
punitive to the economy."
Benchmark 10-year Treasury notes were up 1/32 in
price with a yield 2.509 percent, from 2.512 percent late on
Monday. The 30-year bond was 12/32 lower, yielding
3.622 percent, from 3.6145 percent late in the previous day.
The selling pressure on longer-dated bonds was mitigated by
a $1.464 billion bond purchase by the Fed, part of its $85
billion monthly bond-purchase stimulus program, known as