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Real Yield Collapse

Published 28/03/2019, 08:48
Updated 09/07/2023, 11:32

Bond yields have fallen sharply in recent days. Most of the drop can be attributed to a collapse in real yield, as today’s chart shows. Since the beginning of this month, the US real 10-Year Treasury yield has come down from 0.66% to just 0.25% today.

At the same time, inflation expectations and, thus, the inflation part of nominal bond yields have remained fairly constant. This implies the drop in bond yields has been driven largely by expectations about lower future growth and less by future inflation levels.

Not that long ago the opposite was true, with low employment and accelerating wage growth, and higher oil prices hinting at potential inflationary risks. Whoever said that bond markets are boring?

U.S. Real Yield

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