June 24, 2013 / 1:05 PM / in 5 years

TREASURIES-Five-year TIPS yields turn flat in broad selloff

NEW YORK, June 24 (Reuters) - Yields on U.S. five-year Treasuries Inflation-Protected Securities (TIPS), also known as Treasuries real yields, turned flat on Monday and briefly traded above zero for the first time since February 2011, according to data by TradeWeb.

TIPS, which are less liquid than other U.S. government debt, have been amongst the worst performers since Federal Reserve chairman Ben Bernanke said in May that the U.S. central bank is likely to begin paring back its bond purchases if economic momentum continues.

Bernanke’s comments after last week’s Fed policy meeting on Wednesday that the Fed expects the economy will be strong enough to start reducing purchases this year have added to the rout, causing a broad selloff that has sent TIPS yields spiraling.

Yields on the five-year TIPS were around negative -0.80 percent before last Wednesday’s Fed meeting, and were minus 1.75 percent at the beginning of April.

Concern about inflation had pushed the yields into negative territory as investors bet that the Fed’s bond purchase program would spur inflation, increasing demand for inflation-linked bonds.

A negative yield meant that a borrower paid less than the rate of inflation to issue debt. This was meant to encourage borrowing to help stimulate the economy.

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