The U.S. yield curve on Tuesday was at its flattest in over a decade, driven by rising short-dated Treasury yields and a fall at the long end, even as geopolitical and trade risks eased. Two-year yields were at a decade high of 2.399 percent as economic data from March supported further interest rate hikes by the Federal Reserve in 2018. U.S. homebuilding increased more than expected in March amid a rebound in the construction of multi-family housing units, despite weakness in the single-family segment. The data followed a report on Monday from the U.S. Commerce Department that showed retail sales in March rose 0.6 percent, after three months of declines. "Even with the bad weather in March, the data has really strengthened, supporting the view that the Fed will most likely have to hike rates in June," said John Herrmann, director of U.S. rates strategies at MUFG Securities in New York. While the rising yields on short-dated debt anticipate interest-rate hikes, the fall at the long end suggests the market has dim view of U.S. economic health in the long term - that the first quarter's outcomes will not persist throughout the year, or that the Fed will continue to increase interest rates regardless of whether economic data weakens. Longer-dated Treasuries are a global safe-haven investment. Demand typically increases as geopolitical and market risk rises, pushing down the long end of the yield curve. But Tuesday's flattening followed a reduction in risk, suggesting the trade indicates investors' views about U.S. economic fundamentals. "The flattening we saw several weeks ago was related to risk. And at least in terms of daily headline thinking, there’s less risk perceived that you have to worry about tomorrow," said Jim Vogel, interest rate strategist, FTN Financial in Memphis, Tennessee. Beijing on Tuesday made a trade concession to the United States by lifting a limit on foreign ownership of Chinese carmakers. The announcement represents a major policy shift and suggests China may be willing to negotiate in the ongoing trade dispute between the two countries, reducing the possibility of dramatic economic fallout. The muted reaction to Saturday's U.S.-led air strikes in Syria suggests the market has grown less concerned about possible retaliation. The spread between two- and 10-year Treasury bond yields hit 41.80 basis points, its lowest level since 2007. The spread between five- and 30-year yields fell to 31.70 basis points, a low of more than a decade. The benchmark 10-year government bond was last at 2.819 below its last close at 2.832. Tuesday, April 17 at 1547 EDT (1947 GMT): Price US T BONDS JUN8 145-28/32 0-13/32 10YR TNotes JUN8 120-136/256 0-16/256 Price Current Net Yield Change (pct) (bps) Three-month bills 1.76 1.7925 0.039 Six-month bills 1.95 1.9968 0.005 Two-year note 99-188/256 2.3898 0.013 Three-year note 99-146/256 2.525 0.006 Five-year note 99-42/256 2.6813 -0.002 Seven-year note 99-12/256 2.7766 -0.007 10-year note 99-104/256 2.8193 -0.013 30-year bond 99-224/256 3.0062 -0.024 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 29.25 -1.75 spread U.S. 3-year dollar swap 23.25 -1.00 spread U.S. 5-year dollar swap 12.25 -0.75 spread U.S. 10-year dollar swap 3.50 0.25 spread U.S. 30-year dollar swap -12.50 0.75 spread (Reporting by Kate Duguid Editing by Nick Zieminski and Dan Grebler)