Posted on 03/24/2022 2:41:32 PM PDT by Browns Ultra Fan
The U.S. breakeven 10 year (USGGBE10 Index) went above 3% for the first time EVER.
Breakeven inflation is the difference between the nominal yield on a fixed-rate investment and the real yield (fixed spread) on an inflation-linked investment of similar maturity and credit quality.
Way to go, Joe!
(Excerpt) Read more at confoundedinterest.net ...
Someone explain this in layman’s terms.
Is this good news or bad news? Hard to determine with what’s just been posted.
Is this good news or bad news? Hard to determine with what’s just been posted.
I’d bet you that it’s bad news. Almost would bet money on it.
“Ukraine is a country in Europe. It exists next to another country called Russia. Russia is a bigger country. Russia is a powerful country. Russia decided to invade a smaller country called Ukraine. So basically, that’s wrong,”
The real return is simply the return an investor receives after the rate of inflation is taken into account. The math is straightforward: if a bond returns 4% in a given year and the current rate of inflation is 2%, then the real return is 2%.
So if the breakeven is 3% that means the bond return need to be 3% higher just to keep up with inflation.
This is assuming same maturity and credit rating.
See my post 7.
READ LATER!
So what inflation rate are they measuring this against? Why don’t they even tell us the actual 10 year rate?
That I don’t know. Maybe the charts at the link tells, but in any event, 3% just to breakeven means bond buyers are going to demand a much higher yield.
Not good, but there is no good news out there, economic or otherwise. The dollar will lose its status as world currency with the stupid actions of government. No one will want to finance our reckless spending.
Thanks Rusty…you a mortgage broker?
10 Year Treasury Rate:
Last Value 2.34%
Latest Period Mar 24 2022
Last Updated Mar 24 2022, 18:01 EDT
https://ycharts.com/indicators/10_year_treasury_rate
This story does not make sense to me.
Here’s a chart that shows the breakeven went from .5 in 2020 to 3 on 3/24.
Source: Federal Reserve Bank of St. Louis Release: Interest Rate Spreads
Units: Percent, Not Seasonally Adjusted
Frequency: Daily
The breakeven inflation rate represents a measure of expected inflation derived from 10-Year Treasury Constant Maturity Securities (BC_10YEAR) and 10-Year Treasury Inflation-Indexed Constant Maturity Securities (TC_10YEAR). The latest value implies what market participants expect inflation to be in the next 10 years, on average.
Starting with the update on June 21, 2019, the Treasury bond data used in calculating interest rate spreads is obtained directly from the U.S. Treasury Department.
Suggested Citation:
Federal Reserve Bank of St. Louis, 10-Year Breakeven Inflation Rate [T10YIE], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/T10YIE, March 24, 2022.
https://fred.stlouisfed.org/series/T10YIE
I haven’t picture posting skills to post the graph at link.
No, I’m retired now but worked in finance/ accounting.
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