Course · Act II: Hedge the Book · Chapter 8
Inflation, TIPS and real yields
Nominal versus real yields, how TIPS protect against inflation, breakeven inflation, and why the 2022 bond crash was mostly a jump in real yields, read from real Treasury data.
Key terms
- Real yield
- A yield after inflation: roughly the nominal yield minus inflation. TIPS yields are real yields.
- TIPS
- Treasury Inflation-Protected Securities: principal rises with the consumer price index; never repays less than the original.
- Breakeven inflation
- Nominal Treasury yield minus the TIPS yield of the same maturity: the inflation rate at which both pay the same.
“Real Yields” is part of the full course: 6 puzzles on inflation, tips and real yields. Gullwing and Osprey are fictional banks; the Treasury yields and Fed rates are real. Try this act’s free chapter, “Who Sets the Short End”, first.
“Real Yields” is in Act II: Hedge the Book. 6 puzzles, unlimited retries.
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