*

U.S. consumer confidence falls in September

*

U.S. Richmond Fed index shows contraction in business

activity

*

China unveils stimulus measures, impact limited

*

U.S. rate futures price in 62% chance of big rate cut in

November

(Rewrites paragraph 1, adds new comment, bullets, graphic, U.S.

two-year note auction, updates prices)

By Gertrude Chavez-Dreyfuss

NEW YORK, Sept 24 (Reuters) - U.S. Treasury yields

slipped in choppy trading on Tuesday as weak confidence numbers

and a lower-than-expected business conditions index nudged up

the possibility that the Federal Reserve could do another

outsized rate cut at the November policy meeting.

A decent auction of U.S. two-year notes added to the bid

on Treasuries, pushing their yields lower, as demand for

front-end notes increased with the Fed launching its easing

cycle last week.

Angelo Manolatos, macro strategist, at Wells Fargo said

shorter-dated debt is in great demand overall as investors are

more "confident that inflation is much calmer" and growth

including labor market indicators look to be slowing down as

well.

"The Fed cut 50 basis points last week and it could

continue to ease at that very large increment...So from an

investor standpoint, the risk of higher rates is diminishing and

with that, it looks a lot better to be long Treasuries."

U.S. rate futures have priced in a 62% chance of another

super-sized rate cut of 50 bps at the November meeting, up from

54% on Monday, LSEG calculations showed. The more standard 25-bp

easing showed a 38% probability on Tuesday. For the next two Fed

meetings, rate futures are implying more than 80 bps in cuts.

Earlier in the session, Treasury yields were higher

across the board, supported by elevated risk appetite after

China introduced broad stimulus measures to support its

faltering economy and solid U.S. housing data.

U.S. yields on seven-year notes to 30-year bonds hit fresh

three-week highs, while the yield curve again hit its steepest

level since June 2022, touching that milestone for a fifth

consecutive session.

But that all changed with the release of the soft Conference

Board consumer sentiment survey. U.S. consumer confidence

unexpectedly fell in September. The Conference Board's consumer

confidence index dropped to 98.7 this month from an upwardly

revised 105.6 in August. The decline was the largest since

August 2021. Economists polled by Reuters had forecast the index

rising to 104.0.

The Richmond Fed index fell to a 52-month low of -21 from a

prior low of -19 in August and a low before that of -17 in July.

The index covers activity in the fifth Fed District, which

includes the District of Columbia, Maryland, Virginia, North

Carolina, South Carolina and most of West Virginia, and produces

approximately 9% of the country's gross domestic product.

Treasury yields earlier held their gains after data

showing house prices rose 0.1% on a month-on-month basis after

being unchanged in June. They increased 4.5% in the 12 months

through July, though that's the smallest rise since June 2023.

In afternoon trading, the benchmark 10-year yield was

slightly down at 3.733% after earlier hitting a

three-week high of 3.81% following the housing data.

U.S. 30-year yields were flat at 4.09%, also

hitting a three-week peak of 4.154% earlier in the session.

On the short end of the curve, U.S. two-year yields

post-auction slid 3.6 bps to 3.54%. Those on the

five-year fell 2.3 bps to 3.473%.

The two-year note sale picked up a

high yield of 3.520%

, in line with market forecasts at the bid deadline. The

bid-to-cover ratio, a gauge of demand, was 2.59 lower than last

month's 2.68 and the 2.63 average.

Indirect bidders, which include foreign central banks,

took 67.6% of the notes, compared with an average of 66.8%, BMO

analysts said.

In other parts of the bond market, the U.S.

two-year/10-year yield curve, a gauge of investors' economic

outlook saw its spread widen to as much as 20.2 bps

, the steepest since June 2022. The curve was last

at positive 19.4 bps.

Late on Tuesday, the curve saw a bull steepener, a scenario

in which short-term rates are falling faster than their

longer-dated counterparts, which for the most part suggested

that more rate cuts are underway.