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Implied US Real Long-Term Rates Moving Deeper Into Negative Territory

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We are not in a stagflation environment -- yet.

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The chart below compares the 10-year zero coupon US Treasury yield with the 10-year zero coupon inflation swap rate. The difference is the implied 10-year zero coupon real rate (h/t Greg Trotter) which is becoming increasingly negative. We are not in a stagflation environment yet, but this indicator is certainly starting to point in that direction.


10-year zero coupon US Treasury yield (orange) and the 10-year zero coupon inflation swap rate (white)

Just to put things on perspective, the CRB Commodity Index (CR-Y.NYB) broke through 300 today and is now up 14% from the lows. As inflation expectations pick up (due to increasing rents and rising commodity prices), this push into the negative real rate territory is only going to get worse.

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CRB Commodity Index

Twitter: @SoberLook
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