* U.S. housing starts fell 10 percent in May
* Yields hold in tight recent range
* Fannie, Freddie delistings add to recovery uncertainty
(Adds analyst's quote, updates prices)
By Chris Reese
NEW YORK, June 16 U.S. Treasury debt prices
rose on Wednesday after data showed housing starts in May
slumped to a five-month low, suggesting the economic recovery
Treasuries' gains were muted by a U.S. stock market that
vacillated on either side of unchanged through the day, and the
tight correlation between Treasury prices and stock prices
continued to dominate market action. The major U.S. indexes
finished the day little changed.
"The stock market was down a little bit and then kind of
came back ... and the housing starts number came out very
negative" for the economy, said James Caron, head of global
rates research at Morgan Stanley in New York.
The inverse relationship between stocks and Treasuries
means that as stocks rise, Treasuries prices fall and vice
Benchmark 10-year Treasury notes US10YT=RR closed out the
day 10/32 higher in price to yield 3.27 percent, down from 3.30
percent late on Tuesday.
Treasuries have been mired in a fairly tight range for the
past five days, with the benchmark yield fluctuating between
3.18 percent and 3.33 percent since June 10 as investors
balance worries over the state of Europe's fiscal situation and
some disappointing U.S. employment, sales and housing data with
other signs that manufacturing is leading a recovery.
"The reality is that we have these two risks -- things
could get a lot worse, or things could get a lot better, and in
the middle things will be volatile but within the range," Caron
Analysts said the market had yet to focus on the Treasury's
sale of new notes next week. Investors typically sell some of
their existing holdings of Treasury debt to make room for new
"We'll worry about supply next week," said Raymond Remy,
head of U.S. fixed income at Daiwa Securities in New York. The
Treasury Department will announce on Thursday the sizes of
sales of two-year, five-year and seven-year notes scheduled for
The U.S. Commerce Department on Wednesday said housing
starts fell 10 percent in May, the largest percentage point
decline in 14 months, following the expiration of homebuyer tax
credit program. For more, click on [ID:nN16144404].
"There was a question of whether there would be a second
leg lower in housing and exactly how much lower that leg would
be," said Ian Lyngen, senior government bond strategist at CRT
Capital Group in New York.
"We also had Fannie Mae and Freddie Mac delisted," from the
New York Stock Exchange, he said. "We're not making too much of
that but it just reminds us of the uncertainties that continue
to plague this stage of the economic recovery."
Two-year Treasury notes US2YT=RR traded 1/32 higher in
price to yield 0.74 percent, down from 0.76 late on Tuesday,
while the 30-year Treasury bond US30YT=RR rose 20/32 to yield
of 4.19 percent from 4.22 percent.
(Additional reporting by Emily Flitter; Editing by Leslie