TREASURIES-U.S. bonds slip on housing data, corporate supply

* Upbeat U.S. housing data revive Fed rate hike expectations

* Corporate supply adds selling pressure in Treasuries

* U.S. bonds gain earlier on ECB hint on asset purchase

* U.S. 30-year yield swings in a 12 basis point range

(Updates market action, adds fresh quote)

By Richard Leong

NEW YORK, May 19 (Reuters) - U.S. Treasuries prices fell for

a second day on Tuesday in choppy trading on a wave of corporate

bond supply and upbeat housings starts data that revived

expectations the Federal Reserve may increase interest rates

later this year.

Traders scaled back their bond holdings on news that

domestic home builders broke ground at the fastest pace in

nearly 7-1/2 years in April.

The selling was swift, sending 30-year bond prices down as

much 1-13/32 points before they recovered on bargain-hunting and

exiting of earlier short positions, analysts and traders said.

The latest homebuilding figures were an exception to the

recent spate of disappointing data on business activity and

consumer spending, which suggest a modest rebound following a

likely first-quarter U.S. economic contraction.

"The housing starts data were very strong. Now (NYSE: DNOW - news) the test will

be whether U.S. yields could stay at these levels," said Jim

Caron, portfolio manager at Morgan Stanley Investment Management

in New York.

A growing supply of corporate bonds added selling pressure

on Treasuries, propelling their yields closer to the 5-1/2 month

peaks seen last week.

The European Investment Bank, Goldman Sachs (NYSE: GS-PB - news) and several

companies sold debt on Tuesday after $18 billion in the

investment-grade bond market on Monday, according to IFR, a unit

of Thomson Reuters.

Earlier, the U.S. government debt market rose with gains in

European bonds after Benoit Coeure, a top European Central Bank

official, said it would pick up its bond purchases in May and

June due to slow market activity in July and August.

The step-up in purchases for ECB's 1.1-trillion-euro

quantitative easing program that began in March came as Greece

and its creditors are still seeking terms for a deal that will

unlock more cash for the debt-laden nation.

The yield on German 10-year Bunds was down 2

basis points at 0.633 percent, while the yield on 10-year Greek

sovereign bonds retreated from a 2-1/2 week high to

11.18 percent.

U.S. trading was volatile with the 30-year Treasuries yield

moving within a 12 basis point range. The 30-year bond last

traded 16/32 point lower in price, yielding 3.045

percent, up 3 basis points on the day.

Benchmark 10-year Treasuries notes were down

11/32 in price to yield 2.267 percent, up 4 basis points from

late on Monday.

A week ago, 10-year and 30-year yields reached 5-1/2 month

peaks at 2.366 percent and 3.128 percent, respectively,

according to Reuters data.

(Editing by Meredith Mazzilli)