July 18, 2018 / 1:55 PM / a month ago

TREASURIES-U.S. yields steady ahead of Powell testimony before House panel

    * U.S. yield curve holds at flattest in over a decade
    * U.S. two-year yield holds below near 10-year peak
    * Fed's Powell gave upbeat economic view to Senate panel
    * U.S. housing starts plunge to nine-month low in June 

 (Recasts first paragraph, updates market action, adds quote)
    By Richard Leong
    NEW YORK, July 18 (Reuters) - U.S. Treasury yields held
steady on Wednesday with the yield curve remaining near its
flattest in nearly 11 years in advance of Federal Reserve
Chairman Jerome Powell's testimony on the economy before a House
of Representatives committee.
    Powell's appearance is the second half of his semiannual
testimony before Congress. On Tuesday, Powell offered an upbeat
assessment on the U.S. economy, which supported traders' view
that the U.S. central bank would increase key overnight
borrowing costs perhaps two more times in 2018.
    Traders and investors anticipate no surprises from Powell
when he appears before the House Financial Services Committee at
10 a.m. (1400 GMT).
    "He will likely be greeted with tougher questions and a less
friendly group than the Senate," said Kevin Giddis, head of
fixed income capital markets at Raymond James in Memphis,
Tennessee. 
    Before the Senate Banking Committee on Wednesday, Powell
said: "With appropriate monetary policy, the job market will
remain strong and inflation will stay near 2 percent over the
next several years."
    "The Treasury market is trading slightly higher this morning
as investors have fully digested the Fed chair's comments and
don't seem to have a problem with where the Fed is headed,"
Giddis said.
    The futures market implied traders saw an 89 percent chance
the Fed would increase its target range on key interest rates by
a quarter point, to between 2.00 percent and 2.25 percent, at
its Sept. 25-26 policy meeting, CME Group's FedWatch
program showed.
    It suggested traders priced in a 58 percent likelihood of
another rate hike at the Fed's Dec. 18-19 policy meeting.
      
    Possibility of further rate increases pinned the two-year
yield near its highest since August 2008. It was last
2.611 percent, down 0.4 basis point from late on Tuesday.
    The spread between two-year and 10-year Treasury yields
 was 24.70 basis points after touching 23.40 basis
points earlier Wednesday, which was its tightest since July
2007.
    The yield on the 10-year Treasury was unchanged
on the day at 2.862 percent.
    Treasury yields hit session lows earlier, following a
government report that domestic housing starts fell to a
nine-month low in June on rising costs and land shortage.
July 18 Wednesday 9:38AM New York / 1338 GMT
                               Price                  
 US T BONDS SEP8               145-1/32     0/32      
 10YR TNotes SEP8              120-36/256   1/32      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.975        2.0125    -0.005
 Six-month bills               2.1275       2.1805    -0.006
 Two-year note                 99-202/256   2.6113    -0.004
 Three-year note               99-210/256   2.6879    0.000
 Five-year note                99-98/256    2.7591    -0.003
 Seven-year note               99-132/256   2.8271    -0.004
 10-year note                  100-32/256   2.86      -0.002
 30-year bond                  103-4/256    2.9717    0.002
         YIELD CURVE           Last (bps)   Net       
                                            Change    
                                            (bps)     
 10-year vs 2-year yield       24.70        0.60      
 30-year vs 5-year yield       21.20        0.70      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        22.00         0.25    
 spread                                               
 U.S. 3-year dollar swap        19.50        -0.25    
 spread                                               
 U.S. 5-year dollar swap        13.75         0.00    
 spread                                               
 U.S. 10-year dollar swap        6.50         0.25    
 spread                                               
 U.S. 30-year dollar swap       -4.75         0.00    
 spread                                               
 
    

    
 (Reporting by Richard Leong; Editing by Steve Orlofsky)
  
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