US yields fall ahead of govt debt supply, Powell testimony

NEW YORK: US 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. US 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 US 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 US 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.