3 Min Read
* Record indirect bidder purchase at 10-year TIPS auction
* Ten-year TIPS breakeven rate hits lowest since Trump win
* Higher crude futures on hopes for output curb helps TIPS (Updates market action, adds quote)
By Richard Leong
NEW YORK, May 18 (Reuters) - The U.S. bond market's gauges on inflation expectations rebounded on Thursday from their lowest levels since November on sizzling investor demand at an $11 billion auction of 10-year Treasury Inflation Protected Securities.
Oil futures, which rose on hopes the major producers would agree to extend their current output cuts next week, also buttressed the $1.24 trillion bond sector.
Earlier Thursday, TIPS breakeven rates, or the yield differences between TIPS and regular Treasuries, year TIPS and regular 10-year Treasury notes, had been on track to fall for a fifth straight session before the auction.
Traders had pared their bullish TIPS positions on concerns that domestic inflation would take longer than previously thought to reach the U.S. Federal Reserve's 2 percent goal in the aftermath of a slower year-over-year rise in the government's Consumer Price Index in April.
"I hope today's auction represents a turning point. We are seeing a return to the reflation trade reasserting itself," said Com Crocker, senior analyst at New Century Advisors LLC in New York.
Indirect bidders, including fund managers and overseas central banks, bought a record high share at the latest 10-year TIPS auction on Thursday.
In addition to signs of renewed investor appetite for TIPS, higher oil prices revived TIPS' appeal as an inflation hedge, analysts said.
The 10-year TIPS inflation breakeven rate hit 1.77 percent earlier Thursday. That was the lowest since Nov. 9, the day after the election of U.S. Presidential Donald Trump.
The 10-year breakeven rate was last 1.83 percent, up 2 basis points on the day, Tradeweb and Reuters data showed.
The five-year TIPS breakeven rate was up 2 basis points at 1.73 percent late Thursday after hitting 1.69 percent, the lowest since Nov. 29.
U.S. oil futures settled up 28 cents, or 0.6 percent, at $49.35 a barrel on expectations that key producing countries would stick to production cuts to reduce a global crude glut.
Reporting by Richard Leong Editing by W Simon and Richard Chang