Understanding the breakeven rate is important because it shows what the market is expecting in terms of inflation over a given period. Brief discussion of what the rate means, and how it’s calculated. Brief email exchange with George Goncalves as well.
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Bonds are going to sell off. Major. It’s the only outcome.
This is better than my Economics Master degree.
Investors (not FED) continue to purchase TIPS with negative yields because they are concerned about losing the principal on their investments. Bad economic times are hard on stocks, so paying interest is less costly than losing everything.
Additionally, many investors assume that the Federal Reserve’s monetary policies in troubled economic times will eventually cause inflation to accelerate. If inflation accelerates, investors will once again earn a positive return on TIPS because TIPS’ principal adjusts upwards with inflation.
Thank you so much, I gained alot of knowledge today
subtracting 2 negative is a positive?
Short, relevant, educational
Bond market confuses me too. From what I gather, it's kinda rigged by the Fed at this point as they can use funny money to buy what I have to work for to buy. I don't like competing against counterfeiters for product. Maybe if yield curve control is coming down the pipeline, long duration treasuries might be an okay performer as you can just sell them back to the Fed for a higher price. By the point that the largest currency system in the world is being manipulated at every duration of borrowing, so we would live in a fake, government mandated economy.