* Bonds set for longest winning run since 2008 * Benchmark yields fall to below 100-day moving average * U.S. Treasury to sell $35 billion in 5-year notes * U.S. new home sales unexpectedly dip in August By Richard Leong NEW YORK, Sept 26 (Reuters) - U.S. government debt prices rose on Wednesday for an eighth straight session on worries Spain's reluctance to ask for a full-blown bailout would prolong Europe's debt crisis. The Treasuries market, as measured by the benchmark 10-year note, was on track to match its longest winning streak since late November to early December 2008, according to Reuters data. Longer-dated U.S. yields touched their lowest levels in more than two weeks since they spiked earlier this month in reaction to the Federal Reserve's announcement of a third large-scale bond purchase program, nicknamed QE3. In the face of renewed appetite for U.S. federal debt, the Treasury Department will sell $35 billion of new five-year securities on Wednesday, part of this week's $99 billion in note supply. "Things are bumpy again in Europe. You are seeing more tension there that's leading to a predictable rally on the long end," said Eric Green, global head of rates and FX research and strategy with TD Securities in New York. With Spain's borrowing costs rising again and a key region threatening to secede, Spanish Prime Minister Mariano Rajoy hinted he was ready to request a rescue for the euro zone's fourth biggest economy. He told the Wall Street Journal on Wednesday he would make the move if Spain's debt costs remained too high for too long. The yield on 10-year Spanish debt rose to 6 percent on Wednesday, a threshold which analysts considered unsustainable. Spain's 10-year borrowing cost has been running above 6 percent since mid-May. In addition to growing jitters about Spain, Treasuries prices propelled higher after government data showed an unexpected dip in new home sales in August, reducing optimism the housing recovery gained traction. Back in the United States, benchmark 10-year notes were last up 12/32 in price at 99-31/32 to yield 1.63 percent, below its 100-day moving average of 1.64 percent. The 10-year yield was 4 basis points lower from late on Tuesday. The 10-year note yield has fallen about 25 basis points from a four-month peak set on Sept. 14, the day after the Fed announced it would purchase an additional $40 billion a month in mortgage-backed securities in a bid to stimulate the economy. Increased MBS purchases from the Fed pushed home borrowing costs to a record low. The Mortgage Bankers Association said the average 30-year mortgage rate fell to 3.63 percent in the week ended Sept. 21, the lowest since it began tracking it. The 30-year bond rose 1 point in price to 99, yielding 2.800 percent, down 5 basis points from Tuesday. In "when-issued" trading, the new five-year note was expected to sell at a yield of 0.6510 percent, below the high yield of 0.708 percent at the five-year auction in August.