(Updates market action, adds quote)
NEW YORK, June 12 The U.S. bond market's gauges
on inflation expectations fell to their lowest levels since
November on concerns the recent pullback in price growth would
persist and hamper the overall economy.
New York Federal Reserve data released earlier on Monday
showed inflation expectations fell to multi-month lows in May,
reinforcing concerns that domestic price growth would fall short
of the U.S. central bank's 2 percent goal for a longer period
than previously thought.
Prospects the Fed might not slow its pace of interest rate
increases also weighed on the inflation outlook and reduced the
appeal of Treasury Inflation Protected Securities (TIPS) for
The 10-year inflation breakeven rate, or the yield
difference between 10-year TIPS and regular 10-year Treasury
notes, was 1.77 percent, down 2.6 basis point from Friday's
close. It hit 1.76 percent earlier on Monday, which was the
lowest since Nov. 9, according to Tradeweb and Reuters data.
The five-year TIPS breakeven rate fell 2.6 basis points to
1.69 percent. It touched 1.67 percent earlier on Monday, which
was the lowest since Nov. 29.
"If the Fed continues down its current hike path, markets
will likely view this as being ahead of any inflation pressure,
which should keep downward pressure on TIPS breakevens," Credit
Suisse strategists wrote in a research note.
Fed policymakers are widely expected to raise U.S. interest
rates by a quarter point to 1.00 to 1.25 percent at a two-day
meeting that will begin on Tuesday.
(Reporting by Richard Leong; Editing by W Simon and Meredith