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Nominal yield

A yield quoted in plain currency terms, with no adjustment for inflation; what ordinary Treasuries and corporate bonds pay.

Every yield you see on a standard bond screen is nominal. It compensates you for three things bundled together: the real-interest-rate, expected inflation, and a term-premium for locking money up.

Splitting nominal yields into those components is most of what rates traders do. A nominal selloff driven by rising breakeven-inflation means something quite different from one driven by rising real-yield.

Example: 10-year nominal yield 4.30% = real yield 1.95% + expected inflation 2.35%. If inflation expectations fall 20 basis points and the nominal yield falls the same 20, the real yield is unchanged and rate-sensitive stocks may not rally at all.

Related: real-yield, breakeven-inflation, term-premium, tips

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