10-Year Breakeven Inflation Rate
The breakeven is the inflation rate that makes a nominal Treasury and a TIPS bond of the same maturity pay the same real return. It is the price the bond market puts on a decade of inflation, updated every session.
History
What the breakeven measures
A nominal Treasury pays a fixed dollar coupon. A TIPS bond pays a coupon plus an adjustment tied to the consumer price index. Because both are backed by the same government and trade in the same market, the difference between their yields has to be compensation for inflation. That difference is the breakeven inflation rate.
If the 10-year nominal yield is 4.98 percent and the 10-year TIPS real yield is 2.64 percent, the breakeven is 2.34 percent. That is the rate at which a buyer of either bond would end up with the same return. Buy the nominal bond if you think inflation will come in above that number; buy the TIPS if you think it will come in below it.
The identity that makes this easy to check
Nominal yield equals real yield plus breakeven inflation, with the small cross-product term ignored. That identity is worth remembering because it lets you decompose any nominal move into its two parts. When the 10-year yield rises, either real rates went up — which is a tightening of financial conditions and a headwind for valuations — or inflation expectations went up, which is a different story entirely with different implications for equities.
Our real 10-year yield page publishes the TIPS leg. This page publishes the difference. Read together, the two explain every move in the nominal rate without guesswork.
Why the 2020 to 2022 round trip mattered
The breakeven collapsed in March 2020, when the market briefly priced deflation, and then repriced violently over the following two years. It peaked above 3 percent in 2022 — higher than at any point since the series began in 2003 — as realised CPI ran into the high single digits and the Federal Reserve was forced to abandon its average-inflation framework.
The interesting part is what happened next. Headline inflation fell substantially, and the breakeven came back down with it, settling near the middle of its range. That round trip is the cleanest evidence for why this series is watched: it moves on expectations rather than on realised prints, and expectations are what feed into mortgage rates, corporate borrowing costs and, eventually, wage setting.
What breakevens get wrong
They are not pure expectations. The gap between nominal and TIPS yields includes an inflation risk premium — the extra return investors demand for bearing the risk that inflation surprises — and it can include a liquidity premium because the TIPS market is smaller and less liquid than the nominal market. In stressed periods the liquidity component can dominate, which is why the breakeven sometimes moves for reasons that have nothing to do with inflation.
They are also a market price, not a forecast with a track record. In 2021 the 10-year breakeven stayed close to its historical average for months while realised inflation ran far above it. Anyone who read the breakeven as a prediction of CPI was wrong for a year. Read it as what bond buyers are willing to accept, and it stays useful.
There is a maturity question too. The five-year breakeven reacts faster to policy because it covers a shorter horizon, and the five-year, five-year forward — the market's implied view of inflation from 2031 to 2036 — strips out most of the near-term noise. The 10-year sits between the two and is the version most often quoted, which is why we publish it. If you want to know whether the market thinks the current inflation regime is persistent rather than temporary, the forward measure is the sharper instrument.
How we calculate it
We pull series T10YIE from FRED, which is the Federal Reserve's own published breakeven — the 10-year nominal constant-maturity yield minus the 10-year TIPS real yield. We do not recompute it from the two legs, so there is no risk of a join error or a look-ahead bias. The percentile is the share of daily observations since January 2003 that sit below today's value.
One limitation worth stating plainly: TIPS have only existed since 1997 and the 10-year series stabilised in 2003, so there is no pre-2003 history. That is a shorter record than most indicators on this site, and it means the percentile should be read as a rank within a twenty-three-year window rather than a multi-decade one.
Distribution since 2003
Each row is the reading at that point in the historical distribution. A value in the 90th percentile is higher than nine tenths of the record.
Important
Not investment advice. This page is published for information and education only. It is not a recommendation, solicitation, or offer to buy or sell any security. Market data may be delayed, incomplete, or revised. Indicators describe the past; they do not forecast returns. Past performance does not guarantee future results. Do your own research or consult a licensed financial professional before acting on anything you read here.
Questions
Is the breakeven rate the market's inflation forecast?
Not exactly. It is the difference between the nominal Treasury yield and the TIPS real yield at the same maturity, so it bundles expected inflation together with an inflation risk premium and any liquidity difference between the two markets. Most of the time the expectation dominates, but the gap is not a clean forecast.
Why the 10-year maturity?
Because the 10-year point is the most liquid part of both the nominal and the TIPS curve. Shorter breakevens react mostly to current policy and commodity prices; longer ones are thinner and noisier. Ten years is the compromise most widely quoted.
How is this different from CPI?
CPI measures inflation that has already happened. The breakeven is a forward-looking market price for the next decade. They can diverge for years: the breakeven can stay anchored while realised inflation runs hot, which is exactly what happened in 2021 and 2022.
Why is the latest stretch of the chart locked?
The current reading and the full history since 2003 are free. The most recent sessions — the part that shows what the market is pricing right now — are part of the member plan.