TREASURIES-Yields hit three-year highs, housing data in focus

 (Adds data, auction outlook, 30-yr yields, updates prices)
    By Karen Brettell
    NEW YORK, April 18 (Reuters) - U.S. Treasury yields reached
three-year highs on Monday as investors adjusted for the Federal
Reserve to aggressively raise rates as it tries to stem soaring
inflation that is running at its fastest pace in 40 years.
    Data last week showed that the consumer price index jumped
1.2% last month, the biggest monthly gain since September 2005.
In the 12 months through March, the CPI accelerated 8.5%, the
largest year-on-year gain since December 1981.
    The Fed is expected to hike rates by 50 basis points at its
May and June meetings, at least. Fed funds futures traders are
expecting the Fed’s benchmark rate to rise to 1.27% in June and
to 2.65% in February, from 0.33% now.
    Housing data will be in focus this week for signs on whether
a rapid jump in mortgage interest rates is beginning to dent
demand, with houses already having become less affordable due to
soaring prices.
    "We’re probably going to start to see the beginning of some
demand destruction in the housing market because of the rise in
mortgage interest rates,” said Thomas Simons, a money market
economist at Jefferies in New York.
    “I don’t think it’s enough to really spook the Fed away from
their pretty aggressive take on how to address inflation,”
Simons said, however, “it will probably start to give those
folks who are talking about a recession in a near-term time
horizon, it’ll give them a little more ammunition for the
argument and could lead to yields levelling out.”
    Confidence among U.S. single-family homebuilders fell to a
seven-month low in April as surging mortgage rates and snarled
supply chains boosted housing costs, shutting out some
first-time buyers from the market, a survey showed on Monday.

    Other data this week includes housing starts on Tuesday and
existing home sales on Wednesday.
    Thirty-year mortgage rates have jumped to 5.13%, from 3.33%
at the end of December.
    Concerns that the Fed will dent growth with its aggressive
tightening increased after the yield curve between two-year and
10-year notes inverted late last month, which has historically
been a reliable indicator that a recession will follow in
    That part of the yield curve steepened back to
40 basis points on Monday, after inverting by as far as 10 basis
points on April 4. Benchmark 10-year yields were
last 2.855%, after reaching 2.884% earlier on Monday, the
highest since Dec. 2018.
    Thirty-year yields reached 2.969%, the highest
since April 2019 and in striking distance of the key 3% level.
    Some of the move higher in yields on Monday was seen as due
to relatively light trading volumes with London closed for the
Easter Monday holiday.
    Demand for longer-dated and inflation-linked debt will be
tested this week. The Treasury Department will sell $16 billion
in 20-year bonds on Wednesday and $20 billion in five-year
Treasury Inflation-Protected Securities (TIPS) on Thursday.
    April 18 Monday 3:07PM New York / 1907 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.765        0.777     -0.010
 Six-month bills               1.2125       1.2367    0.023
 Two-year note                 99-156/256   2.4562    0.012
 Three-year note               99-216/256   2.6797    0.014
 Five-year note                98-172/256   2.789     0.029
 Seven-year note               97           2.8539    0.038
 10-year note                  91-168/256   2.8546    0.047
 20-year bond                  88-228/256   3.1313    0.040
 30-year bond                  86-64/256    2.9459    0.029
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        25.75         0.25    
 U.S. 3-year dollar swap        13.75         0.00    
 U.S. 5-year dollar swap         5.00         0.25    
 U.S. 10-year dollar swap        4.25         0.00    
 U.S. 30-year dollar swap      -22.50        -2.00    
 spread (Editing by Alison Williams and Barbara Lewis)