October 19, 2016 / 2:25 PM / 2 years ago

TREASURIES-U.S. bond yields rise on huge Saudi bond deal

* Saudi Arabia launches $17.5 billion global bond deal
    * U.S. single-family housing starts jump in September
    * Traders await clues from ECB on bond purchase program

 (Recasts with updated market action; adds quote)
    By Richard Leong
    NEW YORK, Oct 19 (Reuters) - U.S. Treasury yields rose on
Wednesday as dealers sold government bonds to hedge Saudi
Arabia's first-ever global bond issue of $17.5 billion.
    Saudi's multi-part debt offering drew heavy investor demand
as the world's top oil exporter sought to borrow at historic low
    Bond dealers typically sell Treasuries to hedge against an
issue they underwrite and then buy them back after it is sold.
    "It's a huge deal. There's some rate-lock selling," said
Mary Ann Hurley, vice president of fixed income with D.A.
Davidson in Seattle. "As the Saudi deal gets put away, you could
see some reversal of that rate-lock selling."
    Benchmark U.S. 10-year Treasury notes were last
down 1/32 in price for a yield of 1.754 percent, up 0.6 basis
point from late on Tuesday. The 10-year yield remained below a
four-month peak of 1.841 percent reached on Monday.
    The rise in yields was also spurred by data that showed
domestic single-family home construction rising 8 percent to its
strongest level in seven months in September, which revived some
optimism about the housing sector.
    The jump in single-family housing activity helped to offset
a 38 percent plunge in apartment construction that knocked
overall groundbreaking last month to its weakest level in 1-1/2
    Meanwhile, investors are awaiting possible clues on the
European Central Bank's thinking on its 1 trillion-plus euro
bond purchase program which may conclude as early as March 2017.
    Traders have been speculating whether the ECB, which will
hold a policy meeting on Thursday, would consider paring its
quantitative easing as Europe continues to struggle with weak
growth and faces Britain's exit from the European Union.
    "The market has come to realize central banks have pretty
much done all they can to help markets," Hurley said. "Still the
ECB will maintain its accommodative stance."
  October 19 Wednesday 9:54AM New York / 1354 GMT
 US T BONDS DEC6               164-6/32     -0-3/32   
 10YR TNotes DEC6              130-72/256   -0-4/256  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.335        0.3399    -0.008
 Six-month bills               0.4675       0.4751    -0.005
 Two-year note                 99-228/256   0.8068    -0.004
 Three-year note               100-28/256   0.9627    0.000
 Five-year note                99-120/256   1.236     0.000
 Seven-year note               98-240/256   1.5368    0.003
 10-year note                  97-184/256   1.7538    0.006
 30-year bond                  94-100/256   2.5186    0.007
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        22.75         0.25    
 U.S. 3-year dollar swap        14.00         0.00    
 U.S. 5-year dollar swap         1.50         0.00    
 U.S. 10-year dollar swap      -17.50        -0.50    
 U.S. 30-year dollar swap      -57.50        -0.50    

 (Reporting by Richard Leong; Editing by Chizu Nomiyama)
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