TREASURIES-Ukraine-driven gains muted by Wall St upturn

* NATO says Russian troops massing at Ukraine border

* Ten-year yield touches lows not seen since May (Recasts and adds quotes, late prices)

By Michael Connor

NEW YORK, Aug 6 (Reuters) - U.S. Treasuries prices got a strong lift on Wednesday from rising tensions over Ukraine that stung global financial markets but they ended with just modest gains as Wall Street steadied after a selloff.

Benchmark 10-year notes, whose yield struck a two-months low on Wednesday after trading over 2.50 percent on Tuesday, were up 3/32 in price to yield 2.47 percent. The issue earlier had yielded as little as 2.43 percent, a level last seen on May 28, according to Reuters data.

Thirty-year Treasury bonds were up 2/32 in price to yield 3.27 percent after touching a high on Tuesday of 3.33 percent during trading shaped by bullish U.S. economic data. Its highest yield on Wednesday was 3.29 percent.

"We are entering a phase of equity market weakness and that is despite decent earnings and decent economic news," said Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management. "We are seeing a flight to safety bid in Treasuries and other bond markets around the world."

Investor (Other OTC: IVSBF - news) concerns about the timing of Federal Reserve interest-rate hikes were receding, with fat differentials between European and U.S. yields proving increasingly alluring, portfolio managers said.

"The market is not so much, 'Oh my God, the Fed will be raising rates soon.' That is now off the table for a while," said Wilmer Stith, co-manager of the Wilmington Broad Market Bond fund in Baltimore, Maryland.

"Russia possibly being more aggressive over Ukraine is now on the table," Stith said. "U.S. Treasuries are very attractive on a yield basis with German 10-year bonds at 1.1 percent and ours now at 2.44."

After NATO said Russian troops were massing near Ukraine's border, European stocks fell 0.8 percent, while MSCI (NYSE: MSCI - news) 's world equity index was down 1 percent.

Wall Street indices were up modestly in trading shaped by bargain hunting and disappointment over the collapse of two pending corporate merger offers.

German 10-year bond yields fell 8 basis points to a record low of 1.092 percent, their biggest daily drop since September 2013.

Yields on lower-rated peripheral bonds rose after data showed Italy, the bloc's third-largest economy, had unexpectedly slipped back into recession. (Reporting By Michael Connor in New York; Editing by Nick Zieminski)