TREASURIES-Prices shave losses after builder sentiment index

(Updates prices, comment, changes byline)

By Ellen Freilich

NEW YORK, May 18 (Reuters) - U.S. Treasury debt prices trimmed sharp losses on Monday after an index showed an improved mood among U.S. home builders, in line with expectations.

The National Association of Home Builders/Wells Fargo Housing Market Index showed U.S. homebuilder sentiment rose to 16 in May from 14 in April.

Any ray of hope that the housing slump might be coming to an end would tend to be negative for Treasuries prices, but prices were already down sharply on the day due to a strong stock rally and some traders might have hoped for a more robust reading on home builders' sentiment than the small improvement actually recorded.

Benchmark 10-year notes US10YT=RR were down 17/32, their yields rising to 3.20 percent, up seven basis points on the day. They were down 19/32 before the NAHB report. (Editing by Leslie Adler)