TREASURIES-U.S. yields slide, tracking Wall Street shares, German bonds

(Adds comment, updates prices, table) NEW YORK, Nov 17 (Reuters) - U.S. Treasury yields edged lower on Friday, in line with weakness on Wall Street and declines in German 10-year bond yields, as the yield curve continued to flatten following strong U.S. housing starts data for October. U.S. two-year yields hit a fresh nine-year peak on Friday. The note has touched the nine-year milestone for the last eight sessions. Global risk appetite took a hit earlier on Friday as U.S. stocks tumbled, weighed down by losses in financial and technology stocks. German 10-year bond yields, on the other hand, were on pace for their largest weekly fall in three weeks.

Yields briefly rose after U.S. housing starts surged 13.7 percent to a seasonally adjusted annual rate of 1.29 million units, the highest since October 2016. "The front end of the curve is building in the greater and greater probability of Fed rate hikes," said Tom Simons, money market economist at Jefferies in New York. "This week has been a big week for data prior to the December meeting, especially CPI (consumer price index). The CPI didn't necessarily reject the December rate hike thing, and so people are now more comfortable with that," he added. The upbeat U.S. housing data further flattened the yield curve. The gap between U.S. two-year and 10-year yields contracted to 62.8 basis points, its tightest since November 2007. The difference, meanwhile, in five-year and 30-year yields narrowed to 73.4 basis points. Despite the significant yield curve tightening this year, there is further scope to go, analysts said. "Although the direction has leveled out and possibly turned, there is room for another 20- to 25-basis point flattening as Treasury actually announces larger note auctions in the first quarter," said Jim Vogel, interest rates strategist at FTN Financial in Memphis, Tennesee. "With a stable market outlook with respect to Fed rate increases next year between one and two, currently both 2-year and 3-year could increase in yield an additional 20 basis points over what would otherwise be expected," he added. In late trading, the 10-year Treasury yield fell to 2.350 percent from 2.361 percent late on Thursday. The U.S. two-year yield climbed to a new nine-year peak of 1.73 percent. It was last at 1.725 percent, from 1.712 percent on Thursday. U.S. 30-year bond yields slid to 2.790 percent, down from Thursday's 2.806 percent.

Friday, Nov. 17 at 1449 EST (1949 GMT): Price

US T BONDS DEC7 153-26/32 0-8/32 10YR TNotes DEC7 124-240/256 0-20/256 Price Current Net yield change (pct) (bps) Three-month bills 1.25 1.2712 0.010 Six-month bills 1.3875 1.4165 0.007 Two-year note 99-146/256 1.7255 0.013 Three-year note 99-198/256 1.8283 0.005 Five-year note 99-184/256 2.06 -0.005 Seven-year note 100-24/256 2.2352 -0.008 10-year note 99-24/256 2.3523 -0.009 30-year bond 99-36/256 2.7925 -0.013


Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 16.25 -1.50


U.S. 3-year dollar swap 16.25 -0.50


U.S. 5-year dollar swap 5.75 0.00


U.S. 10-year dollar swap -1.00 -0.25


U.S. 30-year dollar swap -23.50 0.25


(Reporting by Gertrude Chavez-Dreyfuss Editing by Chizu Nomiyama)