No. of Recommendations: 2
“e.g., 10 years ago, 10 year US T bonds yielded 2.49% and inflation was about 1.33%, real return before tax 1.16%
At the moment the bond yield is 4.16% and MCT inflation in the last year has 2.36% and fairly steady, leaving real return before tax 1.80%
An increase of 0.64% before tax isn't much of a leap”
That is one way to look at it. Sadly for anyone who bought the 10y UST 10 years ago, they didn’t realize anywhere close to that 1.16% real return before tax because inflation has been running high.
Break-even inflation rates may not be any better predictors than the current reading of inflation, but for what’s it’s worth the 10y BE is roughly at the same level today as it was 10 years ago at 2.2%.
St. Louis Fed (FRED): 10-Year Breakeven Inflation Rate (T10YIE) | FREDFor anyone that wanted to lock in 10y real yields they could have done so with TIPS securities at about 0.15% 10 years ago and today at about 1.9%.
St. Louis Fed (FRED): 10-Year Breakeven Inflation Rate (T10YIE) | FRED 