* Benchmark yields fall to lowest in two weeks * Bernanke says plan to pare bond purchases not "preset" * U.S. housing starts fall on multi-family drop * Fed's Beige Book shows modest to moderate U.S. growth By Karen Brettell and Richard Leong NEW YORK, July 17 (Reuters) - U.S. Treasuries yields hit their lowest levels in two weeks on Wednesday after Federal Reserve Chairman Ben Bernanke said there was no committed timetable for the U.S. central bank to scale back its bond purchase program. While sticking closely to the timeline he first announced last month that the Fed would halt its current round of bond buying by mid-2014 when unemployment was projected to be around 7 percent, Bernanke, in highly anticipated testimony before Congress, went out of his way to stress that nothing was certain. "Our asset purchases depend on economic and financial developments, but they are by no means on a preset course," Bernanke told the U.S. House of Representatives Financial Services Committee. Treasury yields had soared to 23-month highs after Bernanke in May raised the possibility the Fed might scale back its bond-buying program, known as quantitative easing, later this year. Investors who had bet on the Fed to continue to buy Treasuries and mortgage bonds at its current $85 billion monthly clip at least into 2014 were caught by surprise and stuck with the biggest quarterly losses in Treasuries in 2-1/2 years. While Bernanke's latest remarks on the economy seemed more cautious, they were not enough to dash expectations the Fed would begin to shrink its bond purchases in September. "I don't think there's any game-changing information. On the margin, it's a little more dovish, but the base case hasn't changed," said Gene Tannuzzo, portfolio manager at Columbia Management in Minneapolis. "Most likely, tapering will happen in September." Still, Bernanke's remarks led some to think that smaller bond purchases may instead begin next year and a Fed rate increase might be months, if not years, after QE3 ends, traders said. "Mainly he's trying to drive home his point that Fed policy is data dependent and that they are in control of any timing and pace of any QE tapering," said Michael Lorizio, senior fixed-income trader at John Hancock Asset Management in Boston. Recent data signaled the U.S. economy decelerated in the second quarter despite further improvement in the housing, auto and labor sectors. Economists polled recently by Reuters forecast that gross domestic product slowed to an annualized rate of 1.6 percent in the March-to-June period, compared with a 1.8 percent rate in the first quarter. The recent jump in mortgage rates to two-year highs caused some to worry that the housing recovery could derail. On Wednesday, the Commerce Department reported that U.S. housing starts in June dropped 9.9 percent, hitting the lowest level since last August. But the decline reflected a double-digit plunge in multi-family construction, which analysts say is volatile on a monthly basis. "MODEST TO MODERATE" ECONOMIC GROWTH The Fed's Beige Book on regional business conditions, released before Fed policy-makers meet on July 30-31, showed a modest to moderate pace of economic growth across the country through early July. "It's aligned with the assessment of what the Fed has been conveying in recent months. That is the economy is improving from earlier this year," said Robbert Van Batenburg, direct of market strategy with Newedge USA LLC in New York. Still, the pace of growth remains sluggish, leading many investors to expect it will be unlikely the Fed will pare its bond purchases at a pace that would send yields much higher from current levels, if at all. "Growth is not strong enough for the Fed to draw down stimulus much later this year," Columbia's Tannuzzo said. Benchmark 10-year Treasuries were last up 12/32 in price to yield 2.489 percent, the lowest level since July 3 and down 4.3 basis points on the day. Last week, the 10-year yield rose to 2.755 percent, the highest level since August 2011, according to Reuters data. Medium-term issues were the best performers with the yield on five-year notes falling 6.1 basis points to 1.311 percent. Mortgage-backed securities also fared well. Prices on 30-year 3.5-percent coupon MBS backed by loans guaranteed by Fannie Mae rose 12/32 with a yield of 3.166 percent, down 9.3 basis points from late on Tuesday. LOW-RATES FOR A LONG TIME Bernanke has also aimed to soothe markets by emphasizing that the Fed will keep interest rates low for a long time to come and that it will not sell the debt held on its balance sheet and will reinvest proceeds in new purchases. The Fed views the size of its bond holdings as having a stimulative impact on the economy by holding yields lower than they would otherwise be, even if it is no longer buying bonds. In the derivatives market, since Bernanke's testimony before the House panel, short-term rates futures implied that traders pushed back their expectations of a Fed rate increase to December 2014 from October 2014 on Tuesday.