TIPS Breakeven Rate Falls to Five-Month Low

The "breakeven rate" - the difference between 10-year nominal Treasury yields and 10-year Treasury Inflation Protected Securities (TIPS) yields - is one market-based measure of expected future inflation.  As of yesterday the breakeven rate was 2.20%, down 45 basis points from the recent peak of 2.65% on April 11, and the lowest level since mid-December last year (see chart above).  This downward trend in the breakeven rate suggests that inflationary expectations in the bond market have been moderating in recent months.