TIPS Derived Expected Inflation

The chart above shows the weekly, bond market-based 10-year TIPS-derived expected inflation, calculated as the difference between 10-year regular, nominal Treasury yields and 10-year Treasury inflation-indexed yields (St. Louis Fed data here). After a unusual period in late 2008 resulting in a negative spread when the TIPS 10-year yields were above 4%, and higher than regular Treasury yields of about 2%, the Treasury market seems to have stabilized, and the bond market’s 10-year expectation of inflation is back around 2.5%, consistent with the inflationary expectations from 2004-2007.

About Mark J. Perry 262 Articles

Affiliation: University of Michigan

Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan.

He holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University in Washington, D.C. and an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota.

Since 1997, Professor Perry has been a member of the Board of Scholars for the Mackinac Center for Public Policy, a nonpartisan research and public policy institute in Michigan.

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