TREASURIES-Bond prices rally as poor data drives safety bid

* Weak economic data drags on investor optimism, stocks

* Strong US dollar, on Russian comments, supports bonds

* Lack of Treasury auctions add to support

NEW YORK, June 15 - U.S. Treasury debt rallied on Monday as disappointing economic data took the wind out of equities, propelling investors toward the safe-haven of government bonds.

Traders have begun to fear that a sharp three-month rally in stocks went too far, too fast.

"There's a lot of people out there saying that we need a breather here," said David Dietze, chief investment strategist at Point View Financial Services.

That was particularly true after the New York Federal Reserve Bank reported a surprising pullback in its measure of regional manufacturing, challenging beliefs that the U.S. economy is poised for a rebound. An unexpected decline in homebuilder sentiment, as measured by the National Association of Home Builders/Wells Fargo Housing Index, also dented hopes for a recovery.

"The bogeyman for Treasuries is a strong economy," Dietze said. "This is very bullish for the Treasury trade"

As stocks plunged, benchmark 10-year notes climbed a half point for a yield of 3.73 percent, down six basis points from Friday's close. The Dow Jones industrial average retreated nearly 190 points or 2.15 percent.

Helping the outlook for bonds was a generally improved sentiment toward the dollar, engendered in part by supportive comments overnight from Russian Finance Minister Alexei Kudrin.

The greenback was up 1.3 percent against a basket of currencies, and its strength sapped commodities broadly, another boon to inflation-wary Treasuries.

A lack of Treasury bond auctions also supported prices. Last week's $65 billion refunding auction was absorbed without major difficulty, relieving for now the market's ongoing anxiety about the $2 trillion in new debt expected to hit the market this year alone.

Such fears took benchmark yields to an eight-month high of 4 percent last week, a level that seemed to attract fresh interest.

"People are looking at Treasuries with a more attractive stand. Yields are high enough, which is more appropriate given the supply," said William Bellamy, director of fixed income with Thompson, Siegel & Walmsley in Richmond, Virginia.

The 30-year bond rose 23/32 and was yielding 4.60 percent, down five basis points.