Bond traders are tipping off the Federal Reserve on their inflation outlook before the central bank's meeting this week.

The auction last week of 10-year Treasury Inflation-Protected Securities, known as TIPS, drew the weakest demand in nine years. The sale, which some deemed "terrible," trimmed the market-implied expected inflation rate by about four basis points, the most for a single day since mid-June. The market is basically trolling Fed Chair Janet Yellen, who's said it's "premature" to conclude that the underlying trend of prices is falling short of the bank's 2% goal.

After a week that saw the Bank of Japan and the European Central Bank keep their policies largely unchanged, traders are watching for clues that the Fed will ease up on its tightening path after officials meet on July 25-26. The largest impediment for staying on track for three rate hikes in 2017 is the core consumer price index, whose growth rate has dropped to the lowest level since 2015.

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