December 19, 2017 / 3:24 PM / 8 months ago

TREASURIES-U.S. yields rise on housing starts data before tax bill vote

    * U.S. yield curve steepens in bond market selloff
    * Housing starts reach 13-month peak in November
    * Analysts mull U.S. growth, debt impact from tax overhaul

 (Updates market action, adds quotes)
    By Richard Leong
    NEW YORK, Dec 19 (Reuters) - U.S. Treasury yields rose on
Tuesday as domestic home construction unexpectedly accelerated
to a 13-month high in November, supporting the view of a solid
pace of economic expansion in the fourth quarter.
    The upbeat housing starts figures came as Congress was set
to begin voting on the biggest overhaul of the U.S. tax code in
more than 30 years.
    Republicans, who control both lawmaking chambers, said their
tax plan would boost consumer spending and business investments,
while independent government estimates showed the proposed tax
cuts would end up adding at least $1 trillion to the $20
trillion national debt in 10 years.
    "The housing starts number was stronger-than-expected," said
Mary Ann Hurley, vice president of fixed income at D.A. Davidson
in Seattle. "People are looking at the growth trade and how the
tax plan will impact it."
    Anticipation of bigger corporate profits from the tax
changes propelled the three major Wall Street indexes
 to all-time highs on Monday and reduced the
appeal of lower-yielding U.S. government bonds, analysts and
traders said.
    The selloff in Treasuries also steepened the yield curve for
a second day, moving further away from its flattest level in a
decade on Monday.
    "People are reversing some of that (flattening) trade. We
are seeing a bit of profit-taking," Hurley said.
    At 10:10 a.m. (1510 GMT), benchmark 10-year Treasury yield
 was 2.428 percent, up about 4 basis points from late
on Monday, while the two-year Treasury yield was 1.6
basis points higher at 1.848 percent after hitting a nine-year
peak of 1.857 percent on Monday. 
    Amid light trading, the gap between five-year and 30-year
yields widened to 58.4 basis points from 57.2
basis points on Monday. That spread reached 51.9 basis points
early Monday, which was a level not seen since October 2007,
Reuters and Tradeweb data showed.
    A wave of bond selling emerged following the latest report
on U.S. housing starts which rose 3.3 percent to a seasonally
adjusted annual rate of 1.297 million units, which was the
strongest since October 2016. 
    The November increase in home construction was offset by a
downward revision to the October reading to 1.256 million units
from the previously reported 1.290 million units. 
  December 19 Tuesday 10:11 AM New York / 1511 GMT
 US T BONDS MAR8               152-9/32     -0-29/32  
 10YR TNotes MAR8              123-244/256  -0-72/25  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.36         1.3837    0.036
 Six-month bills               1.4825       1.5145    0.034
 Two-year note                 99-208/256   1.8484    0.016
 Three-year note               99-188/256   1.967     0.022
 Five-year note                99-20/256    2.1976    0.031
 Seven-year note               98-160/256   2.3406    0.037
 10-year note                  98-112/256   2.4283    0.036
 30-year bond                  99-80/256    2.784     0.040
         YIELD CURVE           Last (bps)   Net       
 10-year vs 2-year yield       57.90        1.65      
 30-year vs 5-year yield       58.40        1.30      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        20.50         0.75    
 U.S. 3-year dollar swap        17.75         0.75    
 U.S. 5-year dollar swap         4.75         0.00    
 U.S. 10-year dollar swap       -1.75        -0.50    
 U.S. 30-year dollar swap      -20.50        -0.50    

 (Reporting by Richard Leong; Editing by Phil Berlowitz)
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