Key points
- Real yield = TIPS yield.
- Breakeven inflation = Nominal Treasury - TIPS.
- Demand surges when inflation expectations rise.
Example
If 10Y nominal yields 4.5% and 10Y TIPS yields 2.0%, breakeven inflation is ~2.5%; investors expect roughly 2.5% CPI over the decade.
In history
The 10-year TIPS real yield went from about -1% in 2021 to about +2.5% in October 2023 as the Fed raised rates.
Related terms