TREASURIES-U.S. long-dated yields drift lower, trend still seen higher

* U.S. 10-year note, 30-year bond yields fall from 1-week highs

* U.S. 2-year npote yield touches 2-week peak

* U.S. two-year auction show tepid results (Adds comment, updates prices)

By Gertrude Chavez-Dreyfuss

NEW YORK, Oct 25 (Reuters) - U.S. long-dated Treasury yields slipped on Tuesday after data showed a decline in U.S. consumer confidence this month, although the outlook on yields remained intact as investors see the Federal Reserve raising interest rates in December.

U.S. 10-year note and 30-year bond yields, which move inversely to prices, fell from one-week highs after the release of the consumer confidence report. U.S. two-year note yields slid from two-week peaks.

Data from the Conference Board showed the U.S. consumer confidence index dropped to 98.6 in October from a downwardly revised 103.5 in September.

Short-term yields, however, rose following a poorly received U.S. two-year auction. With expectations of a December rate increase, investors anticipated that U.S. two-year note prices could fall further.

Auction results showed the U.S. two-year note's high yield was 0.855 percent, in line with the expected yield at the auction deadline. Tuesday's yield was also higher than the 0.750 percent rate last month.

The bids, however, came to nearly $66 billion for a 2.53 bid-to-cover ratio, below September's 2.65 and the 2.82 average. Indirect bidders, consisting of foreign central banks, accepted 33.7 percent, below last month's 36.7 percent, and well under the 45.8 percent average.

"It (the two-year note) didn't seem very attractive relative to the odds of a Fed hike down the road," said Kim Rupert, managing director of global fixed income at Action Economics in San Francisco.

On Wednesday, the market will look to an auction of $34 billion in U.S. five-year notes.

In late trading, U.S. 10-year Treasury notes were up 1/32 in price, yielding 1.756 percent, down from 1.763 percent late on Monday. Earlier in the session, 10-year yields hit a one-week peak at 1.788 percent.

Following the auction, the yield gap between U.S. 2-year and U.S. 10-year notes narrowed to 89.80 basis points .

Yield curves typically flatten when inflation expectations decline, or when the Fed is seen raising interest rates in the near term.

Interest rate futures on Tuesday showed a nearly 80 percent chance the Fed would raise rates in December, according to CME Group's FedWatch.

U.S. 30-year bonds were 9/32 higher in price to yield 2.501 percent, down from Monday's 2.516 percent. U.S. 30-year yields touched a one-week peak of 2.541 percent earlier on Tuesday.

U.S. two-year note yields were at 0.856 percent, up from Monday's 0.840 percent. Earlier, two-year yields hit a two-week high of 0.86 percent.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Chris Reese and Meredith Mazzilli)