NEW YORK, April 21 (Reuters) - U.S.-based funds that focus on Treasury Inflation Protected Securities posted their first weekly outflow in 2017 after the government said last week its Consumer Price Index unexpectedly fell in March, Lipper data showed late Thursday.
The disappointing CPI was the latest data that led investors to further to reduce their inflation expectations. Falling oil prices, recent soft readings on jobs growth and consumer spending and doubts about tax cuts and infrastructure spending from Washington have caused investors to dial back holdings, based on U.S. inflation accelerating this year.
TIPS fund assets decreased by $66.28 million to $61.82 billion in week ended April 19. This was the first weekly drop since the week of Dec. 7.
TIPS fund assets were still $5 billion higher since the end of 2016, according to Lipper, a Thomson Reuters unit.
A week ago, the U.S. Labor Department said CPI, the government’s broadest inflation gauge, fell 0.3 percent in March for its first decline in 13 months and the biggest fall since January 2015 due to weak prices on gasoline and mobile phone services.
TIPS principal and interest payments are benchmarked against the CPI.
This week, TIPS inflation breakeven rates, which are yield differences between TIPS and regular Treasuries, fell to their lowest since late last year, according to Tradeweb and Reuters data.
The five-year TIPS breakeven rate touched 1.73 percent on Tuesday, the lowest since Dec. 19 before rebounding to 1.78 percent on Friday.
The 10-year breakeven rate held at a five-month low of 1.85 percent reached on Thursday. (Reporting by Richard Leong; Editing by Bernadette Baum)