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TREASURIES-U.S. yields jump as tax bill moves towards passage

* House approves tax overhaul, Senate vote seen later Tuesday

* U.S. 2-year yield hits 9-year peak, 5-year at 6-1/2 year high

* U.S. yield curve steepens in bond market selloff

* Housing starts reach 13-month peak in November

(Updates market action, adds quote, graphic) NEW YORK, Dec 19 (Reuters) - U.S. Treasury yields rose on Tuesday with the benchmark yield hitting a seven-week high as the biggest overhaul of the U.S. tax code in more than 30 years appeared on track to become law by the end of the week. The U.S. House of Representatives approved the debt-financed tax plan on Tuesday, sending the bill to the Senate, where lawmakers were due to take up the package later in the evening. President Donald Trump would then be expected to sign it shortly after. 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. "Obviously the tax bill is going to add to our already increasing deficits over the next year," said John Canavan, market strategist at Stone & McCarthy Research Associates in New York. "The impact is going to be combined with the Feds unwinding of the balance sheet." Prior to the House vote, traders were selling bonds in reaction to news that domestic home construction unexpectedly accelerated to a seasonally adjusted annual rate of 1.297 million units, a 13-month high, in November. This supported the view of a solid pace of economic expansion in the fourth quarter. 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. U.S. stock prices were marginally lower on Tuesday. The selloff in Treasuries also steepened the yield curve due to profit-taking, reversing some of the flattening for a second day. "I think that what were seeing here primarily is just position-squaring into year-end and taking some profits on the curve-flattening that weve seen," Canavan said. The gap between five-year and 30-year yields widened to 59.6 basis points from Monday's 57.2 basis points. It contracted to 51.9 basis points on Monday, the slimmest since October 2007, Reuters and Tradeweb data showed. Benchmark 10-year Treasury yield was up 7 basis points to 2.459 percent after hitting its highest since late October. The two-year yield touched a nine-plus year peak of 1.861 percent, while five-year yield reached 2.230 percent, which was the highest since April 2011. December 19 Tuesday 3:35PM New York / 2035 GMT Price

US T BONDS MAR8 151-20/32 -1-18/32 10YR TNotes MAR8 123-184/256 -0-132/2

56

Price Current Net Yield % Change

(bps)

Three-month bills 1.3625 1.3862 0.038 Six-month bills 1.48 1.5119 0.031 Two-year note 99-204/256 1.8566 0.025 Three-year note 99-180/256 1.9778 0.033 Five-year note 98-250/256 2.2195 0.053 Seven-year note 98-112/256 2.3702 0.066 10-year note 98-40/256 2.4608 0.069 30-year bond 98-160/256 2.8183 0.074 YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 60.20 4.05 30-year vs 5-year yield 59.70 2.55

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 20.50 0.75

spread

U.S. 3-year dollar swap 18.00 1.00

spread

U.S. 5-year dollar swap 4.50 -0.25

spread

U.S. 10-year dollar swap -2.00 -0.75

spread

U.S. 30-year dollar swap -21.25 -1.25

spread

(Additional reporting from Kate Duguid; Editing by Phil Berlowitz and Diane Craft)