Nominal & Real Yields & Inflationary Expectations
Market Briefing: Nominal & Real Yields & Inflationary Expectations
Yardeni Research, Inc.
July 12, 2023
Dr. Edward Yardeni
516-972-7683 eyardeni@
Debbie Johnson
480-664-1333 djohnson@
Mali Quintana
480-664-1333 aquintana@
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Table Of Contents Table Of Contents
Nominal & Real Yields Government Bond Yields
1-2 3-15
July 12, 2023 / Nominal & Real Yields & Inflationary Expectations
Yardeni Research, Inc.
Nominal & Real Yields
Figure 1.
6.5
6.5
6.0 10-YEAR US TREASURY BOND & TIPS YIELDS
6.0
(percent, daily)
5.5
5.5
5.0
5.0
4.5
10-Year Treasury
4.5
Bond Yield (3.86)
4.0
TIPS Yield (1.60)
7/12
4.0
3.5
3.5
3.0
3.0
2.5
2.5
2.0
2.0
1.5
7/12
1.5
1.0
1.0
.5
.5
.0
.0
-.5
-.5
-1.0
-1.0
-1.5
-1.5
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Source: Federal Reserve Board.
Figure 2.
3.5
WIDELY USED PROXY FOR 10-YEAR EXPECTED INFLATION RATE* (percent, daily)
3.0
Expected Inflation Proxy (2.24) 2.5
2.0
3.5
3.0
2.5 7/11
2.0
1.5
1.5
1.0
1.0
.5
.5
.0
.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
* Nominal 10-year US Treasury bond yield minus 10-year TIPS yield. Source: Federal Reserve Board.
Page 1 / July 12, 2023 / Nominal & Real Yields & Inflationary Expectations
Yardeni Research, Inc.
Nominal & Real Yields
Figure 3.
18
18
US TREASURY BOND YIELD & CORE PCED INFLATION
16
16
10-Year US Treasury
Bond Yield
14
(percent) (3.75)
14
Core PCED*
12
(yearly percent change) (4.62)
12
10
10
8
8
6
6
May
4
4
2
2
0
0
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26
* Excluding food & energy. Source: Bureau of Economic Analysis, and Board of Governors of the Federal Reserve System.
Figure 4.
12
12
REAL 10-YEAR TREASURY BOND YIELD vs 10-YEAR TIPS YIELD
10
(percent)
10
8
Real Bond Yield* (0.78)
8
10-Year TIPS Yield
(percent) (1.60)
6
6
4
4
2
7/12
2
Jun
0
0
-2
-2
-4
-4
-6
-6
-8
-8
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26
* 10-year Treasury yield less yearly percent change in CPI. Note: Shaded areas are recessions according to the National Bureau of Economic Research. Source: Federal Reserve Board and Bureau of Labor Statistics.
Page 2 / July 12, 2023 / Nominal & Real Yields & Inflationary Expectations
Yardeni Research, Inc.
Government Bond Yields
Figure 5.
10
10
FIVE-YEAR TREASURY NOTE YIELD MINUS YEARLY PERCENT CHANGE IN CORE PCED
8
8
6
6
4
4
2
2
0
0
May
-2
-2
-4
-4
78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26
Source: Federal Reserve Board and Bureau of Economic Analysis.
Figure 6.
10
10
REAL 10-YEAR TREASURY BOND YIELD*
(percent)
5
5
Average = 3.04
0
0
May
-5
-5
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26
* 10-year Treasury yield less yearly percent change in core PCED. Source: Federal Reserve Board and Bureau of Economic Analysis.
Page 3 / July 12, 2023 / Nominal & Real Yields & Inflationary Expectations
Yardeni Research, Inc.
Government Bond Yields
Figure 7.
10
10
THIRTY-YEAR TREASURY BOND YIELD MINUS YEARLY PERCENT CHANGE IN CORE PCED
5
5
0
0
May
-5
-5
78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26
Source: Federal Reserve Board and Bureau of Economic Analysis.
Figure 8.
4
REAL 10-YEAR TREASURY BOND YIELD (percent)
3
2
1
Real 10-Year Yield Using PCED* (-1.05) Using TIPS (1.55)
4
3
2 Jun
1
0
0
-1
May
-1
-2
-2
-3
-3
-4
-4
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
* 10-year Treasury bond yield less yearly percent change in core PCED. Source: Federal Reserve Board and Bureau of Economic Analysis.
Page 4 / July 12, 2023 / Nominal & Real Yields & Inflationary Expectations
Yardeni Research, Inc.
Government Bond Yields
Figure 9.
22
22
REAL BOND YIELD & NOMINAL FEDERAL FUNDS RATE
20
20
18
18
Real 10-Year Treasury Yield* (1.39)
16
Nominal Federal Funds Rate (5.08)
16
14
14
12
12
10
10
8
8
6
6
Jun
4
4
2
2
Jun
0
0
-2
-2
79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 23 25
* US Treasury 10-year bond yield minus median forecast of year-over-year CPI inflation rate over the next 10 years using Philadelphia Fed Survey of Professional Forecasters data (monthly series interpolated from quarterly data starting as two quarters per year during Q4-1979 until Q4-1991 when the data continue with four quarters a year). Source: Federal Reserve Board, US Treasury, Thomson Reuters I/B/E/S, and Federal Reserve Bank of Philadelphia.
Figure 10.
20
20
REAL 10-YEAR TREASURY BOND YIELD & FEDERAL FUNDS RATE
(percent)
Federal Funds Rate (5.1)
10
Real Bond Yield* (-1.0)
10
0
0
May
-10
-10
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26
* 10-year Treasury yield less yearly percent change in core PCED. Source: Federal Reserve Board and Bureau of Economic Analysis.
Page 5 / July 12, 2023 / Nominal & Real Yields & Inflationary Expectations
Yardeni Research, Inc.
Government Bond Yields
Figure 11.
10
10
REAL 10-YEAR TREASURY BOND YIELD
(percent)
5
5
0
0
Real Bond Yield** (-1.1) Real Bond Yield* (-1.0)
May
-5
-5
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26
* 10-year Treasury yield less yearly percent change in core PCED. ** 10-year Treasury yield less yearly percent change in core CPI.
Source: Federal Reserve Board and Bureau of Economic Analysis.
Figure 12.
10
10
NONFARM BUSINESS PRODUCTIVITY & REAL BOND YIELD
5
5
Q1
0
0
Productivity
Jun
(20-quarter percent change) (1.4)
Real Bond Yield* (-1.1)
-5
-5
56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26
* 10-year Treasury bond yield minus yearly percent change in core CPI. Source: US Department of Commerce, Federal Reserve Board, and Bureau of Economic Analysis.
Page 6 / July 12, 2023 / Nominal & Real Yields & Inflationary Expectations
Yardeni Research, Inc.
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