Skip to content
GetProfitable
Search
Dictionary

Real yield

The return on a bond after stripping out inflation, quoted directly by TIPS and calculated for nominal bonds as yield minus expected inflation.

Real yield is the number that actually tells you whether you are getting richer. A 6% nominal yield with 7% inflation is a losing trade; a 2% nominal yield with 0% inflation is a decent one.

Rising real yields are a headwind for gold, long-duration growth stocks and anything valued off distant cash flows, because the discount rate on those cash flows has genuinely gone up rather than just tracking inflation.

Example: the 10-year nominal yield is 4.30% and the 10-year breakeven-inflation is 2.35%. The real yield is 1.95%. If nominal yields rise to 4.60% while breakevens stay put, the real yield jumps to 2.25% and gc typically comes under pressure.

Related: nominal-yield, tips, breakeven-inflation, real-interest-rate, fisher-equation

Educational only, not advice. Spotted an error? Post in Site Feedback.