* Market awaits Fed policy decision
* Rise in U.S. housing starts shows resiliency - economists
* Treasury to auction five-year notes at 1130 EST (1630 GMT)
By Ellen Freilich
NEW YORK, Dec 18 U.S. Treasuries prices slipped
on Wednesday after the government reported a
better-than-expected jump in U.S. housing starts in November and
on caution before the Federal Reserve's statement concluding its
two-day policy meeting.
U.S. equities opened higher, in sync with gains in European
shares that were aided by solid German sentiment data. Gains in
riskier assets like stocks tend to diminish demand for
safe-haven U.S. debt.
"The Treasury market is cheaper this morning and all eyes
are on the Federal Reserve announcement at 2 o'clock, with a
number of market participants increasing their odds for tapering
given positive labor market and growth data over the past
several weeks," said Jake Lowery, Treasury trader and portfolio
manager for global interest rates at ING U.S. Investment
News that U.S. housing starts rose to their highest level in
nearly six years in November fit the recent pattern of improved
economic data, with starts for multi-family homes jumping 26.8
"Housing starts posting a new high for this cycle
underscores the point that the interest-rate-sensitive sectors
of the economy are experiencing strength that may allow the Fed
to pull back on accommodation," Lowery said.
Supply was expected to be another source of pressure on the
"With two consecutive weeks of supply - including a
five-year auction just before Fed statement today and seven-year
note and TIPS auctions tomorrow - supply is unusually heavy
given the constrained holiday calendar and that could put some
further pressure on the curve," Lowery said.
The Treasury will sell $35 billion in five-year debt on
Wednesday. On Thursday, it will sell $29 billion
in seven-year notes ; and $16 billion in five-year
Treasury Inflation-Protected Securities.
But for the moment, traders remained focused on what the Fed
will say about its stimulus program when it concludes a
two-day policy meeting. Many analysts expect a tapering
announcement in the first quarter of next year, but say a move
to rein in bond buying this week is possible.
"Strong data and taking risk off the table ahead of the FOMC
decision is weighing on prices," said Thomas di Galoma, co-head
of fixed-income rates at ED&F Man Capital in New York.
Benchmark 10-year Treasury notes were down
11/32, their yields rising to 2.88 percent, toward the high end
of their recent range.
The 30-year bond price was down 21/32, its yield
rising to 3.91 percent.
A Reuters poll last week showed 32 economists forecast the
U.S. central bank would act in March, while 22 said it would
scale back its $85 billion monthly bond-buying program in
January. Twelve economists expected a tapering announcement this