TREASURIES OUTLOOK-U.S. yields rise on supply, 10-year holds below 2 pct

* U.S. sells $35 bln 5-year notes to solid demand as FOMC

meets

* U.S. home price appreciation soothes some worries

-Case-Shiller

* Hedging on large corporate bond deals propels yields

higher

* Surprise drop in consumer confidence limits bond selling

(Repeats to additional subscribers)

By Richard Leong

NEW YORK, April 28 (Reuters) - U.S. Treasuries yields rose

on Tuesday with the 10-year yield holding below 2 percent as

investors reduced bond holdings to make room for government and

corporate supply while awaiting the outcome of the Federal

Reserve's policy meeting.

Data from S&P/Case-Shiller showed a stronger-than-expected

rise in U.S. home prices in February, adding to selling in

Treasuries.

"It's a double dose of Treasuries and corporate supply.

There's a crowding out effect," said Stanley Sun, interest rate

strategist at Nomura Securities International in New York.

Large corporate deals competed for investors' dollars, with

Amgen (Xetra: 867900 - news) and Oracle (NYSE: ORCL - news) bringing out multi-part

issues worth $3.5 billion and $10 billion, respectively,

according to IFR, a Thomson Reuters unit.

The Treasury Department sold $35 billion in five-year notes

, part of this week's $90 billion in fixed-rate

supply, at the lowest yield since January.

Treasuries yields briefly backtracked from session highs

following a surprise drop in the Conference Board's index on

U.S. consumer confidence to its lowest level since December.

The decline in bond prices was also limited by the absence

of a breakthrough in talks between Greece and its creditors.

Greek borrowing costs have fallen since Monday on

hopes Athens will soon obtain more cash after Greek Prime

Minister Alexis Tsipras reshuffled his negotiation team.

In late afternoon U.S. trading, the yield on benchmark

10-year Treasuries notes was up 5.8 basis points

from late on Monday to 1.982 percent. It approached the top end

of its 21 basis-point trading range set after the Federal

Reserve's policy meeting in March, when the Fed downgraded its

economic outlook.

The 30-year bond yield was 6.5 basis points

higher at 2.677 percent.

The Fed opened its two-day policy meeting on Tuesday, and is

scheduled to released its policy statement at 2 p.m. (1800 GMT)

on Wednesday.

On balance, domestic data has come in weaker than forecast,

supporting bets the U.S. central bank might leave rates near

zero into late 2015.

On Tuesday, S&P/Case Shiller said its gauge on home prices

in 20 U.S. cities grew 5.0 percent in February from a year ago,

stronger than a forecast increase of 4.7 percent.

(Reporting by Richard Leong; editing by Grant McCool and Leslie

Adler)