Demand for (TIPS), a 10-year inflation-protected bond issued by the US Treasury on Thursday, was weaker than expected, showing confidence in the Fed's claims of a temporary rise in inflation.
The winning yield of the $13 billion TIPS bond was-0.805 per cent, about 2 basis points higher than the pre-issue yield, meaning demand was lower than brokers expected. The interest paid on the bond is determined by the consumer price index (CPI), and the difference between the TIPS yield and the yield of the ordinary 10-year bond before the issue is 2.46%, reflecting the average CPI increase needed to equalize the two.
After this bond issueBreak-even inflation briefly fell below 2.45% for the first time since May 7. It hit a 2013 high of nearly 2.6% last week.
