February 12, 2018 / 4:06 PM / 10 months ago

U.S. 5-year TIPS yield hits highest since 2009

NEW YORK, Feb 12 (Reuters) - The yield on U.S. five-year Treasury Inflation Protected Securities rose to its highest since 2009 on Monday as concerns about inflation and a rising U.S. budget deficit have stoked a bond market selloff.

Rising bond yields, with the 10-year Treasury yield hitting a four-year peak near 3 percent, have rattled stock markets around the world last week, slashing about $8 trillion in value.

“Higher real yields change the relative value proposition of stocks and bonds, raising the bar for equities and other risk assets as investors reassess risk/reward,” Richard Turnill, BlackRock global chief investment strategist, wrote in a research note.

Traders awaited more evidence on whether U.S. inflation is accelerating in the wake of the January payrolls report that showed the largest annual wage gain since June 2009. The pickup in salary growth has stoked bets the Federal Reserve may raise key overnight borrowing costs faster to keep inflation in check.

The Labor Department will release the Consumer Price Index for January at 8:30 a.m. EST (1330 GMT) on Wednesday.

Analysts polled by Reuters expect the year-over-year increase in the government’s broadest inflation gauge likely to slow to 1.9 percent from 2.1 percent in December.

“Given the recent roller coaster ride in equities was sparked in good part by inflation fears accelerating rate hikes, the latest inflation data will be seen as increasingly important and telling, to date. A further easing of price pressures should offer welcome, further calm to the market this week,” Lindsey Piegza, chief economist at Stifel Fixed Income, wrote in a note.

The yield on five-year TIPS reached 0.600 percent, the highest since November 2009, earlier Monday before easing to 0.531 percent, Tradeweb data showed.

The 10-year TIPS yield was last at 0.764 percent after hitting 0.846 percent, the highest since September 2013, according to Tradeweb. (Reporting by Richard Leong; Editing by Jeffrey Benkoe)

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