US 10-year break-evens reach three-month low before TIPS sale

Consumer Prices

A measure of the U.S. cost of living was unchanged in April, restrained by a drop in energy prices and supporting the view of some Fed policy makers that inflation will ease. Last month’s consumer-price index matched the median forecast of economists surveyed by Bloomberg News and followed three straight gains that included a 0.3 percent rise in March, the Labor Department said May 15.

The Conference Board’s gauge of the outlook for the next three to six months decreased 0.1 percent after a 0.3 percent gain in March, the New York-based group said today. Economists projected the gauge would rise by 0.1 percent, according to the median of 49 estimates in a Bloomberg News survey.

The Fed Bank of Philadelphia’s general economic index fell to minus 5.8 this month, the lowest reading since September, from 8.5 in the previous month. Economists forecast the gauge would rise to 10, according to the median estimate in a Bloomberg News survey. Readings less than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware.

Economic Data

Japan’s economy expanded an annualized 4.1 percent during the first three months of 2012, more than forecast, boosted by reconstruction spending. The growth rate exceeded all but seven of 27 estimates in a Bloomberg News survey of economists, a Cabinet Office report showed today in Tokyo.

The Fed plans to buy as much as $2 billion of Treasuries due from February 2036 to May 2042 today, according to the Fed Bank of New York’s website. The purchases are part of the central bank’s program to replace $400 billion of shorter-term debt in its holdings with longer maturities by the end of June to help keep down borrowing costs.

Greece’s inability to form a government is fueling concern the nation will renege on pledges to cut spending as required by the terms of its two bailouts negotiated since 2010.

“Investors are flocking to safe assets,” said Bin Gao, head of interest-rate research for Asia and the Pacific at Bank of America Merrill Lynch in Hong Kong. “If we get Greece dropping out of the euro, I see much lower yields for U.S. Treasuries.”

Bloomberg News

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