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UPDATE 1-U.S. TIPS break-even rates set to fall for second month
March 31, 2017 / 2:03 PM / 8 months ago

UPDATE 1-U.S. TIPS break-even rates set to fall for second month

(Updates market action, adds background)

NEW YORK, March 31 (Reuters) - The U.S. bond market’s gauges on inflation expectations are on track to decline for the second straight month due to lower energy prices and reduced expectations that fiscal stimulus from Washington will bring faster economic growth.

The 10-year inflation break-even rate, or the yield difference between 10-year Treasury Inflation Protected Securities and regular 10-year Treasury notes, was last at 1.97 percent, down almost 1 basis point from Thursday and nearly 6 basis points lower than a month earlier, Tradeweb and Reuters data showed.

The decline in TIPS break-even rates was mitigated by data that showed U.S. inflation had moved closer to the Federal Reserve’s 2 percent goal.

On Friday, the core rate on personal consumption expenditures grew 0.2 percent in February, in line with analysts’ forecasts. That brings the Fed’s preferred inflation gauge’s year-over-year increase to 1.8 percent.

In March, U.S. oil futures fell to near $50 a barrel from about $55 at end of February on record domestic crude inventories and concerns about whether the Organization of the Petroleum Exporting Countries’ output cuts are enough to solve global oversupply.

Furthermore, TIPS break-even rates have fallen in recent days on doubts about whether U.S. President Donald Trump and a Republican-controlled Congress could enact tax cuts, looser regulations and infrastructure spending to boost the economy later this year. (Reporting by Richard Leong; Editing by Chizu Nomiyama and Lisa Von Ahn)

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