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10-year inflation expectations

How high is inflation going to be over the next 10 years? It’s difficult to say, but we can measure what the markets expect. FRED has recently added 15 interest rate spreads, and one of them is perfect for measuring inflation expectations. There are 10-Year Treasury Inflation-Indexed Constant Maturity Securities whose price should include these expectations. You can tease them out by comparing the price of these securities with the price of securities that are identical except for the inflation indexing: 10-Year Treasury Constant Maturity Securities. From the look of the graph, it doesn’t appear that markets believe any significant inflation will occur over the next 10 years. In fact, the graph suggests that no significant inflation has been expected since these inflation-indexed securities were introduced.

How this graph was created: Search for “Breakeven inflation” and select the series of your choice. There is also a 5-year series. Both┬á5- and 10-year series are available in daily or monthly frequencies.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: T10YIEM


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