| NEW YORK
NEW YORK May 19 The U.S. bond market's gauges
on inflation expectations rose on Friday in step with stronger
oil and stock prices as they recovered further after slipping to
their lowest since November on concerns about domestic price
growth losing momentum.
Inflation breakeven rates, or the yield premiums on regular
Treasuries over Treasury Inflation Protected Securities (TIPS),
increased for a second day but were heading for a third
consecutive week of decline.
The 10-year TIPS breakeven rate, or the yield difference
between 10-year TIPS and regular 10-year Treasury notes, was
last at 1.85 percent, up 2 basis points from late Thursday but
down nearly 2 basis points on the week.
This barometer on investors' inflation outlook in the next
decade sagged to 1.77 percent on Thursday, which was the lowest
since Nov. 9, according to Tradeweb and Reuters data.
Breakeven rates had fallen earlier this week in response to
a disappointing reading on the government's Consumer Price Index
for April released last Friday. They reversed their decline
following strong investor demand at an $11 billion 10-year TIPS
auction on Thursday.
"We attribute the weak performance to soft recent U.S.
inflation data," Well Fargo Securities senior strategists
Michael Schumacher and Boris Rjavinski wrote in a research note.
In the 12 months through April, the CPI, which TIPS
principal and interest payments are benchmarked against, was up
2.2 percent, slower than the 2.4 percent increase in March.
Some analysts raised the risk of a further decline in TIPS
breakeven rates if major oil producers fail to agree on an
extension of their current production cuts at a meeting next
Moreover, investors who had been bullish on TIPS may scale
back those positions even more if U.S. President Donald Trump
and leading Republican lawmakers continue to struggle to
implement their perceived pro-growth economic policies, they
Investors had piled into TIPS as a part of the reflation or
"Trumpflation" trade on the notion the U.S. economy would
accelerate from a rapid enactment of tax reform, looser
regulations and infrastructure spending once Trump took office.
In early Friday trading, the three major U.S. stock indexes
opened higher with the S&P 500 index last up 0.6 percent.
U.S. oil futures were up 1.6 percent at $50.14 a
barrel after touching their highest level in over three weeks.
(Reporting by Richard Leong; Editing by Andrea Ricci)