* U.S. housing starts fall, briefly push yields lower
* Investors consolidate positions ahead of quiet holiday
(Recasts, updates prices, adds comment, table, byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Dec 16 U.S. Treasury debt yields
inched higher on Friday, continuing a trend that has been in
place for several weeks, with investors consolidating some
positions ahead of what is expected to be a quiet holiday period
for economic data.
Benchmark U.S. 10-year yields were on track for six straight
weeks of gains.
The Federal Reserve's interest rate forecasts on Wednesday
showed three more rate increases in 2017, accelerating a selloff
that started with the victory of U.S. President-elect Donald
Trump on the expectation of more inflationary infrastructure and
"We took direction from the Fed, but over the next couple of
weeks, we'll see some more cleaning up of positions heading into
the year-end," said Tom Simons, money market economist at
Jefferies & Co in New York.
"Next week and the week after are going to be pretty thin
with the holidays coming up and people taking off. There's not a
lot of news on the calendar until the U.S. employment report on
A sharp drop in U.S. housing starts for November briefly
weighed on yields, which move inversely to prices.
Data showed U.S. new housing projects dropped 18.7 percent
to a seasonally adjusted annual rate of 1.09 million units.
October's starts, however, were revised up to a 1.34
million-unit rate, the highest since July 2007.
Economists polled by Reuters had expected housing starts to
fall to a 1.23 million-unit rate in November.
In mid-morning trading, 10-year Treasury prices
were down 4/32, yielding 2.593 percent, up from Thursday's 2.578
percent. On the week, 10-year yields have gained nearly 13 basis
U.S. 30-year bond prices were down 13/32,
yielding 3.167 percent, up from 3.145 percent late on Thursday.
Yields on U.S. two-year notes, the maturity most
sensitive to interest rate expectations, were at 1.256 percent,
down slightly from 1.264 percent the previous session. The note
has gained 12 basis points in yield this week.
The yield curve was also flatter, with the spread between
U.S. 5-year notes and 30-year bonds hitting as narrow as 103
basis points. That was the flattest since early September, as
investors priced in aggressive tightening by the Fed next year.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Chizu
Nomiyama and Meredith Mazzilli)