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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) 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 Price

US T BONDS MAR8 152-9/32 -0-29/32 10YR TNotes MAR8 123-244/256 -0-72/25

6

Price Current Net Yield % Change

(bps)

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

Change (bps)

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

Change (bps)

U.S. 2-year dollar swap 20.50 0.75

spread

U.S. 3-year dollar swap 17.75 0.75

spread

U.S. 5-year dollar swap 4.75 0.00

spread

U.S. 10-year dollar swap -1.75 -0.50

spread

U.S. 30-year dollar swap -20.50 -0.50

spread

(Reporting by Richard Leong; Editing by Phil Berlowitz)