… as you might conclude from the historical track of the past fifty years:
then the current 10-year Treasury rate of 1.87%/year is consistent with market expectations of deflation at an average rate of 0.63%/year over the next decade.
If you think that the market's forecast of the equilibrium Treasury real rate over the next decade will be much less than 2.5%/year--as the real TIPS rate of
Neither possibility seems consistent with market expectations of a Federal Reserve that understands its mission.
And I mus tsay that I do find it difficult to believe that the breakeven 10-year inflation number of 2.46%/year is an expected-value market forecast rather than a reflection of the fact that the marginal players in the TIPS market on the buy side are willing to pay heavily to lay nominal risk off while the marginal players on the sell side require a substantial premium to take nominal risk on.