November 20, 2015 / 8:51 PM / 4 years ago

U.S. TIPS break-even rates rise to highest level since August

NEW YORK, Nov 20 (Reuters) - The U.S. bond market’s gauge on investors’ inflation expectations rose on Friday to its highest levels since August on some stabilization in oil prices and expectations of a pickup in domestic price growth.

Appetite for Treasury inflation-protected securities intensified following solid investor demand at Thursday’s $13 billion auction of 10-year TIPS supply, analysts said.

“It’s a follow-through from yesterday’s auction. We also have had good inflation data,” said David Keeble, global head of interest rates strategy at Credit Agricole Corporate & Investment Bank in New York.

Earlier this week, the U.S. Labor Department said the consumer price index rose 0.2 percent in October, matching the median forecast among economists polled by Reuters.

Spot U.S. oil futures settled a tad lower on Friday, holding above $40 a barrel.

The October core CPI rate, which excludes volatile food and energy prices, was up 1.9 percent on a year-over-year basis, which is close to the Fed’s 2 percent inflation goal and faster than the 1.6 percent rate at the start of the year.

The yield premium on regular 10-year Treasuries notes over 10-year TIPS was last 1.64 percentage points, about 3 basis points wider than Thursday, according to Tradeweb.

This was the highest for the 10-year TIPS inflation break-even rate since Aug. 10.

The five-year TIPS break-even rate was 1.29 percentage points in late trading, which was the highest since Aug. 31.

The 30-year break-even rate rose to 1.84 percentage points, the highest since Aug. 10. (Reporting by Richard Leong; Editing by Leslie Adler)

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