* U.S. new home sales drop 14.5 pct in March
* Market manufacturing PMI dipped to 55.4 in April
* Traders await $35 bln five-year note auction
NEW YORK, April 23 (Reuters) - U.S. Treasuries yields fell on Wednesday after weak U.S economic data spurred safe-haven bids and traders covered short positions against bonds following a recent selloff.
The Commerce Department said sales of new U.S. single-family homes dropped 14.5 percent to a seasonally adjusted annual rate of 384,000 units in March, declining for a second consecutive month.
Financial data firm Markit, meanwhile, said its preliminary, or "flash," U.S. Manufacturing Purchasing Managers Index dipped to 55.4 in April from 55.5 in March. Economists polled by Reuters expected a reading of 56.0.
"You cannot continue to attribute this weakness in the economy to the weather, and that's why people were a little surprised," said Stanley Sun, interest rate strategist at Nomura Securities International in New York.
Some traders had expected a continuation of better U.S. economic data to show that activity was improving after a brutally cold winter.
Traders also said market participants were covering short positions after a selloff in safe-haven bonds in recent sessions after a joint statement from Russia, Ukraine, the European Union and the United States on Thursday to ease tensions in Ukraine.
The difference between the share of investors who are short longer-dated Treasuries than those who are long rose to its highest level in about 11 months, a J.P. Morgan Securities survey released on Tuesday showed.
The share of "short" investors exceeded the share of "long" investors by 23 percentage points on Monday, up from 21 points last week. This was the most since May 28, 2013, it said.
"The market got itself a bit short," said Kim Rupert, managing director of global fixed income at Action Economics in San Francisco. "As prices decline, buyers will step in."
Traders awaited the Treasury Department's auction of $35 billion in five-year notes on Wednesday, the second round of $96 billion in new supply this week. The Treasury will sell $29 billion in seven-year notes on Thursday.
The benchmark 10-year U.S. Treasury note was last up 8/32 in price to yield 2.7 percent, from 2.726 percent late Tuesday. Prices on 30-year Treasury bonds were last up 11/32 to yield 3.48 percent, from 3.5 percent late Tuesday.
Prices on 5-year Treasury notes were last up 6/32 to yield 1.70 percent, from 1.75 percent late Tuesday.
(Reporting by Sam Forgione)