U.S. bonds rose on Tuesday as traders focused on weakening U.S. consumer confidence and ignored stronger-than-expected data showing that U.S. home prices last year climbed the most since 2005.
The 30-year U.S. Treasury bond made the strongest gain.
Insurance companies and pension funds with extended investment horizons were likely buyers of the 30-year Treasurys, according to rate-strategist Boris Rjavinski at UBS in Stamford, Connecticut.
"Pensions and insurance companies have long-dated liabilities,'' Rjavinski said. ``The long bond is one of the best matches for them.''
After falling on Monday, the 30-year bond last rose 22/32 of a point in price to yield 3.660 percent, compared with 3.701 percent on Monday.
(Read more: The Fed is 'out of touch' with US economy: Polcari)
The benchmark 10-year U.S. Treasury note rose 12/32 in price to yield 2.699 percent, down from 2.745 percent on Monday. The session low was 2.7 percent.
Shorter maturities were mixed, with more modest gains or small price declines.
The market's reaction to the drop in the confidence index might be overdone and was unlikely to diminish broad expectations that interest rates will rise, market strategists said.
"It's a modest drop,'' said Jennifer Vail, head of fixed-income research at U.S. Bank Wealth Management in Portland, Oregon. "It could actually be related to the pullback in equities that's now ending. We expect it to be transitory.''
TD Securities strategist Gennadiy Goldberg blamed the index decline on a fall in expectations among survey takers that is likely to be reversed.
"We look for the removal of debt ceiling uncertainty and a recovery in equity prices to help support the expectations component of the index in future months, with confidence continuing to show modest improvement,'' Goldberg said.
Treasury prices increased early in New York trading and reacted little to the release of the S&P/Case-Shiller composite index posting a better-than-forecast 0.8 percent rise in single-family home prices during December from November.
The index drawn from 20 metropolitan regions also showed a 13.4 percent year-on-year gain in home prices, which S&P Dow Jones Indices said was the best annual increase in eight years.
The U.S. Treasury Department on Tuesday sold $32 billion of 2-year notes at a high yield of 0.340 percent, or 1 basis point below the when-issued level just ahead of the sale as gauged by Reuters data.