Treasury Inflation Protected Securities are lagging behind conventional U.S. government debt for a third month before the U.S. sells $15 billion of TIPS today.
Inflation notes have handed investors a 0.5 percent loss since the end of October, versus a 0.2 percent slide for the broader market, Bank of America Merrill Lynch data show. Fidelity Investments said the odds of a strong increase in inflation in 2013 are low, though investors can guard against a pickup in coming years. The House of Representatives voted to temporarily suspend the U.S. borrowing limit, a step toward averting a delay in payments that threatened the economy.
“Inflation isn’t a concern now,” said Shinji Kunibe, chief portfolio manager for fixed-income investment at Nissay Asset Management Corp. in Tokyo, which oversees the equivalent of $58 billion. “The debt ceiling problem was merely postponed, and fiscal tightening will put downward pressure on the economy,” weighing on bond rates, he said.
Benchmark 10-year yields were unchanged at 1.82 percent as of 11:52 a.m. in Tokyo, according to Bloomberg Bond Trader. The price of the 1.625 percent note due in November 2022 was 98 7/32.
Japan’s 10-year rate held at 0.735 percent. The nation’s government debt market has gained 0.4 percent this month, according to the Bank of America figures.
The world economy will expand 3.5 percent this year, less than the 3.6 percent forecast in October, the International Monetary Fund said yesterday.
In the U.S., “underlying economic conditions remain on track,” the IMF said as it reduced its forecast for the world’s largest economy to 2 percent from 2.1 percent in 2013 and raised it 0.1 percentage point to 3 percent next year.
U.S. consumer prices advanced 1.7 percent in December from a year earlier, based on the most recent data from the Labor Department. The average over the past two decades is 2.5 percent.
So-called core prices, which exclude volatile food and energy costs, increased 1.9 percent. The 20-year average is 2.3 percent.