February 26, 2019 / 2:32 PM / 6 months ago

TREASURIES-U.S. yields fall ahead of govt debt supply, Powell testimony

    * Powell to testify before Senate panel at 10 a.m.
    * U.S. to auction $32 bln 7-year notes at 1 p.m. 
    * U.S. housing starts tumbles to lowest in over two years
    * U.S. homes appreciate at slowest pace since 2014 

    By Richard Leong
    NEW YORK, Feb 26 (Reuters) - U.S. Treasury yields fell on
Tuesday as investors prepared for $32 billion worth of
seven-year government debt supply and awaited Federal Reserve
Chair Jerome Powell's impending testimony about the economy
before a Senate panel.
    Bond yields fell to session lows in the wake of data that
showed domestic housing starts decreased 11.2 percent in
December to a seasonally adjusted annual rate of 1.078 million
units, their weakest pace since September 2016.
    "For a housing sector already assumed on shaky legs, this is
alarming," Jon Hill, interest rates strategist at BMO Capital
Markets wrote in a research note.
    The housing sector showed further weakness at the end of
2018. U.S. home prices across 20 cities appreciated at a 4.2
percent annual pace in December, the slowest since November
2014, according to Case-Shiller.
    At 9:22 a.m. (1422 GMT), the yield on benchmark 10-year
Treasury notes was down 3.4 basis points at 2.639
percent. 
    Two-year Treasury notes were 1.9 basis points
lower at 2.488 percent.    
    The flagging housing market was one of the worrisome spots
for U.S. policy-makers who took a dovish turn late last year and
signaled they would be patient before raising interest rates
again.
    Fed Chief Powell will testify before the Senate Banking
Committee at 10 a.m. (1500 GMT), in the first of a two-day
appearance before federal lawmakers.
    Following that, the U.S. Treasury Department will sell $32
billion in seven-year government notes at 1 p.m.
(1800 GMT).
    In "when-issue" activity, traders expected the seven-year
issue to sell at a yield of 2.541 percent, which
would be the lowest yield since December 2017, according to
Tradeweb.
    
February 26 Tuesday 9:22AM New York / 1422 GMT
                               Price                  
 US T BONDS MAR9               146-23/32    19/32     
 10YR TNotes MAR9              122-76/256   9/32      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.41         2.4586    0.001
 Six-month bills               2.45         2.5152    -0.005
 Two-year note                 100-6/256    2.4879    -0.019
 Three-year note               100-34/256   2.4532    -0.025
 Five-year note                99-168/256   2.4485    -0.033
 Seven-year note               100-150/256  2.5321    -0.038
 10-year note                  99-224/256   2.6393    -0.034
 30-year bond                  99-200/256   3.0111    -0.021
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       14.90        -0.65     
 30-year vs 5-year yield       56.20        1.25      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.75        -0.50    
 spread                                               
 U.S. 3-year dollar swap         6.25        -0.75    
 spread                                               
 U.S. 5-year dollar swap         5.25         0.25    
 spread                                               
 U.S. 10-year dollar swap        0.00        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -21.75        -1.25    
 spread                                               
 
    

    
 (Reporting by Richard Leong; Editing by Bernadette Baum)
  
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