The yield on US Treasury Inflation Protected Securities (TIPS) is close to zero for bonds maturing in ten years’ time and negative for those with a shorter remaining life. This presumably reflects a belief that Fed policymakers will continue to lean with the wind and keep short-term real interest rates negative for the foreseeable future. While the latest FOMC statement will have done nothing to dispel this notion, TIPS are potentially vulnerable to a further decline in inflation expectations.
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