(Updates market action after 10-year TIPS sale)
NEW YORK, March 23 The U.S. bond market's gauges
on 10-year inflation expectations hovered near their lowest in
more than two months on Thursday following a fair $11 billion
auction of 10-year Treasury Inflation Protection Securities.
Investors' outlook on domestic inflation has softened this
week as oil futures slid to four-month lows, prompted by
concerns that output curbs led by OPEC have not dented record
U.S. crude stockpiles.
Doubts that U.S. President Donald Trump and leading
Republican lawmakers can quickly enact tax cuts, deregulation
and infrastructure spending also dampened a view that inflation
will accelerate from its current modest pace.
Top Republicans are struggling to secure votes to start
dismantling the Affordable Care Act in the House of
Worries that U.S. fiscal stimuli will be stalled have
rattled stock markets and knocked down prices across risky
assets this week, raising concerns investors will discard their
bullish bets on faster U.S. economic growth that were triggered
by Trump's presidential win.
"The risk remains that the larger reflation trade will
unwind with the market likely to reprice sharply in the
medium-term if Trump and Congress fail to pass anything
meaningful in the next few days," BMO Capital interest rates
strategist Aaron Kohli wrote in a research note.
Amid concerns about low inflation, investors purchased
nearly 80 percent of the latest 10-year TIPS offering on
Thursday with direct bidders awarded their largest share since
"The buyside put in another strong performance in this
auction, specifically direct bidders," said Thomas Simons,
senior money market economist at Jefferies LLC in New York.
In Thursday afternoon trading, the 10-year inflation
breakeven rate, or the yield difference between 10-year Treasury
Inflation Protected Securities and regular 10-year Treasury
notes, was 1.97 percent, less than 1 basis point lower than
Wednesday's close, Tradeweb data showed.
The 10-year TIPS breakeven rate hit 1.95 percent on
Wednesday, the lowest since Jan. 17, according to Reuters data.
The five-year TIPS breakeven rate was 1.96
percent, down 1 basis point on the day, while the 30-year
breakeven rate gained 1 basis point at 2.07
percent after hitting a three-month trough on Wednesday.
In the energy market, U.S. oil futures settled down 0.7
percent at $47.70 a barrel after declining to $47.01 on
Wednesday, the lowest since Nov. 14.
(Reporting by Richard Leong; Editing by Bernadette Baum and