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UPDATE 1-U.S. TIPS breakeven rates hold gains as PPI edges up in June
July 13, 2017 / 1:25 PM / 4 months ago

UPDATE 1-U.S. TIPS breakeven rates hold gains as PPI edges up in June

(Adds background, updates market action)

NEW YORK, July 13 (Reuters) - The U.S. bond market’s gauges on inflation expectations held their earlier gains on Thursday as data on producer prices unexpectedly edged higher in June, supporting the view that domestic inflation would gradually reach the Federal Reserve’s 2 percent goal.

Still, the latest reading on the producer price index (PPI) did not alter the perception that underlying inflation remains muted with little evidence of wage pressure despite a firm labor market.

The recent decline in oil prices due to concerns about global oversupply has also caused traders and policymakers to become more uncertain about when price growth would accelerate.

“With major moves in prices at the producer level necessary to spark significant shifts in prices at the consumer level, we do not believe there is any cause for concern whatsoever (in either direction) from recent PPI data nor in all likelihood from what lays ahead,” Joshua Shapiro, chief U.S. economist at MFR Inc, wrote in a research note.

The Labor Department said earlier on Thursday the PPI for final demand rose 0.1 percent in June after being unchanged in May. Analysts had forecast the index to remain unchanged last month.

However, the PPI increased 2.0 percent on a 12-month basis, weaker than the 2.4 percent gain in May.

At 9:12 a.m. (1312 GMT), the 10-year inflation breakeven rate, or the yield difference between 10-year Treasury Inflation Protected Securities and regular 10-year Treasury notes, was 1.77 percent, up 0.7 basis point from Wednesday, according to Tradeweb and Reuters data. (Reporting by Richard Leong; Editing by Meredith Mazzilli)

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