* U.S. housing starts fall, briefly push yields lower
* Investors consolidate positions ahead of quiet holiday
(Updates prices, adds comment)
By Gertrude Chavez-Dreyfuss
NEW YORK, Dec 16 U.S. long-dated Treasury debt
yields edged 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 posted six straight weeks of
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
"In the week ahead, the Treasury market faces a dearth of
economic data and with little on the calendar to suggest any
looming event risk, we're anticipating another period of
consolidation as the higher yield range continues to be
defined," said Ian Lyngen, head of U.S. rates strategy at BMO
Capital Markets in New York.
"We're still constructive on Treasuries and while we were
frankly surprised by the market's response to the Fed, the
selloff did give us better placement to play the market from the
long side," he added.
Treasuries further sold off, pushing yields higher, after
Richmond Fed President Jeffrey Lacker said on Friday the U.S.
economy likely needs more than three rate hikes next year. He
added that a burst of demand would likely require a steeper path
of rate increases.
A sharp drop in U.S. housing starts for November, meanwhile,
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.
In late trading, 10-year Treasury note prices
were down 6/32, yielding 2.600 percent, up from Thursday's 2.578
percent. On the week, 10-year yields have gained 13 basis
U.S. 30-year bond prices were down 24/32,
yielding 3.185 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 almost
103 basis points. That was the flattest since early September,
as investors priced in aggressive tightening by the Fed next
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Chizu
Nomiyama and Meredith Mazzilli; Editing by Chizu Nomiyama)