February 24, 2017 / 4:25 PM / a year ago

TREASURIES-Long-dated yields slide to two-week lows in line with Europe

* European political uncertainty weighs on U.S. yields

* U.S. new home sales rise less than expected in January

* U.S. consumer sentiment eases in February (Adds details, comments, byline, table)

By Gertrude Chavez-Dreyfuss

NEW YORK, Feb 24 (Reuters) - U.S. long-dated Treasury debt yields dropped to two-week lows on Friday, weighed down by declines in Europe amid persistent political uncertainty as well as a soft batch of U.S. data that suggested a more mixed outlook for the world’s largest economy.

U.S. two-year note yields, which move inversely to prices, also slid to two-week troughs, along with that of U.S five-year and seven-year notes.

In Europe, German two-year yields fell to record lows, while France’s 10-year bond yield hit a one-month low at 0.94 percent in a flight to safety.

“I think we’re rallying mostly from what’s going in Europe,” said Tom di Galoma, managing director at Seaport Global Holdings in New York. “European governments are rallying and we’re benefiting from that.”

France and its upcoming election remain front and center in terms of political risks for European government bond traders. Investors fear that far-right National Front leader Marine Le Pen might win the presidential election this year and lead France out of the euro zone. Current polls, however, show Le Pen losing either to centrist Emmanuel Macron or right-wing Francois Fillon.

Aside from France, there are also upcoming elections this year in the Netherlands, Germany and possibly Italy.

In the United States, a lackluster set of U.S. data also pressured bond yields, with new home sales growing less than expected in January and consumer sentiment easing last month.

The Commerce Department said new home sales increased 3.7 percent to a seasonally adjusted annual rate of 555,000 units, lower than the forecast of a 570,000-unit rate.

The University of Michigan surveys of consumer sentiment, meanwhile, showed a final reading of 96.3 for February, down from January’s 98.5.

“It looks like the trend in the (new home sales) data has weakened over the past few months, which could be a response to the increase in mortgage rates,” said Daniel Silver, economist at JP Morgan in New York.

On Friday, the chances of a U.S. rate increase in March dwindled to roughly 18 percent, from 22 percent on Thursday, according to the CME’s FedWatch.

In late morning trading, U.S. 10-year notes were up 16/32 in price to yield 2.329 percent, compared with 2.388 percent late Thursday. Yields fell as low as 2.331 percent, the lowest since Feb. 9.

U.S. 30-year bond prices also rose, up more than 1 point, yielding 2.973 percent, down from Thursday’s 3.023 percent. U.S. 30-year yields also touched a two-week low of 2.969 percent. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler)

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