Economy 2 MIN READ

U.S. 10-Year TIPS yield turns positive for first time since March 2020

April 20, 2022By Reuters

The yield on 10-year U.S. inflation-linked bonds broke above negative territory on Tuesday for the first time since March 2020, when the Federal Reserve announced its unprecedented stimulus response to the coronavirus pandemic.

A positive yield on Treasury Inflation-Protected Securities (TIPS) US10YTIP=RR means an investor would break even on the Treasury securities in 10 years, after accounting for expected inflation. The 10-year TIPS yield rose to 0.005%.

TIPS also are referred to as real yields because they subtract projected inflation from the nominal yield on Treasury securities.

The Fed is expected to continue hiking rates aggressively as it tackles inflation, following its first interest rate increase in more than three-years in March. Those expectations have sent yields on Treasuries to three-year highs as investors price in tighter monetary conditions.

By keeping real yields below zero, the Fed sought to offset economic weakness as businesses closed and laid off workers due to the spread of the coronavirus.

Fixed income investors such as pensioners have been hurt, however, as their investments failed to return enough to offset consumer price increases.

Five-year TIPS yields US5YTIP=RR remain negative and last traded at -0.504%.

(Reporting by Herbert Lash and Karen Brettell; Editing by Leslie Adler and Cynthia Osterman)

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