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Real Rates in the Long Run

Notes on the Week Ahead

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The Future of Treasuries

The most obvious explanation is fast-growing global demand for long-term high-quality bonds. The last four months have seen a sharp sell-off the treasury market with 10-year nominal bond yields rising by 0.86% to 4.16%. Averaging the two periods together suggests a real tenure yield of 1.61%. Finally, there is the market for treasury inflation protected securities or tips. Tips were introduced by the US Treasury in 1997 and promised a real yield supplemented by the actual rate of inflation as measured by headline CPI.

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