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NEW YORK, June 12 (Reuters) - 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 investors.
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 Mazzilli