U.S. TIPS breakeven rates rise on Yellen's remarks

NEW YORK (Reuters) - The U.S. bond market's gauges on investors' inflation expectations rose on Tuesday as Federal Reserve Chair Janet Yellen hinted the U.S. central bank would raise interest rates "cautiously" due to global risks on the U.S. economy.

Yellen's perceived dovish remarks on future rate hikes contrasted with recent comments from some top Fed policy-makers who said the U.S. economy is faring well enough to warrant further policy normalization.

"Given the risks to the outlook, I consider it appropriate for the Committee to proceed cautiously in adjusting policy," Yellen said, referring to the policy-setting Federal Open Market Committee, in a speech at an event in New York.

The U.S. bond market rallied on Yellen's remarks, which also revived bets that the Fed would allow inflation to move perhaps even above its 2 percent goal.

On Monday, the Commerce Department said domestic inflation, as measured by the core rate on personal consumption expenditures which is the Fed's preferred inflation gauge, grew 1.7 percent in February on a year-over-year basis.

The rise in yield premiums on regular U.S. Treasuries over Treasury Inflation Protected Securities, known as inflation breakeven rates, was capped by a drop in oil futures .

The five-year TIPS breakeven rate last traded at 1.49 percent, up more than 5 basis points from late Monday, while the 10-year TIPS breakeven rate was 1.62 percent, 6 basis points higher than Monday, according to Tradeweb.

TIPS breakeven rates hit one-week lows last week.

(Reporting by Richard Leong; Editing by Jonathan Oatis)

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