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TREASURIES-U.S. yields slip as risk appetite fades

NEW YORK, Nov 17 (Reuters) - U.S. Treasury yields edged lower on Friday, in line with falls on Wall Street and declines in German 10-year bonds, 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 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 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. "Continued middling inflation and relatively attractive levels compared to other markets will push a lot of inflows into the long end of the curve," said Jefferies' Simons. In midmorning 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 1.725 percent. It was last 1.717 percent, from 1.712 percent on Thursday. U.S. 30-year bond yields slid to 2.793 percent, down from Thursday's 2.806 percent.

November 17 Friday 10:31AM New York / 1531 GMT Price

US T BONDS DEC7 153-27/32 0-9/32 10YR TNotes DEC7 124-236/256 0-16/256 Price Current Net Yield % Change

(bps)

Three-month bills 1.245 1.2661 0.005 Six-month bills 1.385 1.4139 0.005 Two-year note 99-148/256 1.7214 0.009 Three-year note 99-198/256 1.8283 0.005 Five-year note 99-186/256 2.0583 -0.007 Seven-year note 100-24/256 2.2352 -0.008 10-year note 99-24/256 2.3523 -0.009 30-year bond 99-28/256 2.794 -0.012

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 16.75 -1.00

spread

U.S. 3-year dollar swap 16.50 -0.25

spread

U.S. 5-year dollar swap 6.00 0.25

spread

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

spread

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

spread

(Reporting by Gertrude Chavez-Dreyfuss Editing by Jonathan Oatis)