* U.S. housing starts rise to four-year high in December
* Filings for jobless benefits fall to five-year low
* Talk of investors shifting cash into stocks from bonds
* Debt ceiling debate, bold Japanese policy curb bond losses
By Richard Leong
NEW YORK, Jan 17 U.S. government debt prices
fell on Thursday, as surprisingly strong data on the housing
market raised hopes of the U.S. economy accelerating, and
spurred investors to buy stocks and growth-oriented assets and
sell low-risk bonds.
News about the Bank of Japan pursuing a program of
open-ended asset purchases to help its economy, similar to the
one the Federal Reserve has implemented, limited the drop in
Benchmark Treasury yields rose for the first time in five
sessions after hitting their lowest levels in two weeks on
Wednesday on worries about a protracted fight over raising the
$16.4 trillion federal debt limit.
Earlier this month, they rose near 2 percent, an eight-
"The market is finding it hard to ignore the better economic
data and today we had the housing starts numbers," said Robert
Tipp, chief investment strategist at Prudential Fixed Income in
Newark, New Jersey.
The U.S. Commerce Department said home builders broke ground
at an annualized rate of 954,000 units in December, which was
the fastest monthly pace in four years.
Government data also showed the number of Americans filing
new claims for unemployment benefits fell to a five-year low
last week, but the Labor Department said the drop stemmed
largely from seasonal factors, not dramatic improvement in the
Traders brushed off a disappointing report on U.S.
Mid-Atlantic business activities from the Philadelphia Federal
Still the encouraging housing data were the catalyst for
some investors to shift money into stocks from Treasuries in an
effort to achieve higher returns, analysts and traders said.
"We are seeing some rotation out of fixed income into
equities," said Larry Milstein, head of government and agency
trading with R.W. Pressprich & Co. in New York.
Benchmark 10-year notes fell 15/32 in price to
97-25/32 with their yield rising to 1.873 percent, up 5.5 basis
points from late on Wednesday.
The 30-year bond dropped 1 point to 93-28/32.
The 30-year yield rose 5.3 basis points from late Wednesday to
On Wall Street, the Standard & Poor's 500 index was
up 0.8 percent on the unexpectedly large rise in housing starts
and better-than-expected results from online marketplace eBay
DEBT CEILING WORRIES LINGER
While the optimistic housing data took center stage on
Thursday, worries about a contentious fight on the federal debt
Just over two weeks after the bitter budget negotiations to
avert the 'fiscal cliff' -- a package of automatic tax hikes and
spending cuts which economists warn could cause a U.S.
recession, traders have been bracing for another standoff
between U.S. President Barack Obama and Republican lawmakers.
There have been signs this week the two major U.S. political
parties might reach a compromise so the government's borrowing
cap will be raised so it will not default on its debt as early
as late February.
U.S. House Budget Committee Chairman Paul Ryan said on
Thursday his Republican party is considering pressing for only a
short-term extension of U.S. borrowing authority.
A U.S. default will hurt the long-term credit rating and the
appeal of its debt to investors and foreign central banks, but
traders have been more focused on this possible outcome as a
negative for the stock market and the economy.
The 10-year Treasury yield will likely hold within the
trading range of 1.75-2.00 percent it has established since the
start of the year until the debt ceiling is raised.
"We are not going to trade out of this range until we get a
resolution," said R.W. Pressprich's Milstein.
In the credit default swap market, the five-year cost to
insure against a U.S. default hovered at 44 basis points, its
highest level since August 2011 during the first debt ceiling
fight between the White House and Republicans, according to data