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The Real Cost of Treasury Borrowing

Summary:
Halfway through November, TIPS 10 year at -0.876% and ten year adjusted for median expected inflation (from November Survey of Professional Forecasters, released today) at -1.264%. Figure 1: Nominal ten year constant maturity Treasury yields (black line), CBO projection (green line), WSJ November survey mean yields (orange +), Survey of Professional Forecasters November survey mean yields (pink line), TIPS ten year constant maturity yields (red line), ten year expected inflation adjusted (real) yields (brown x). Inflation adjustment using Survey of Professional Forecasters (SPF) median survey response for 10 year CPI inflation. Source: Federal Reserve via FRED, CBO (July), SPF, and author’s calculations. Perspective on how low real rates are now, and how previous forecasts have overshot

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Halfway through November, TIPS 10 year at -0.876% and ten year adjusted for median expected inflation (from November Survey of Professional Forecasters, released today) at -1.264%.

The Real Cost of Treasury Borrowing

Figure 1: Nominal ten year constant maturity Treasury yields (black line), CBO projection (green line), WSJ November survey mean yields (orange +), Survey of Professional Forecasters November survey mean yields (pink line), TIPS ten year constant maturity yields (red line), ten year expected inflation adjusted (real) yields (brown x). Inflation adjustment using Survey of Professional Forecasters (SPF) median survey response for 10 year CPI inflation. Source: Federal Reserve via FRED, CBO (July), SPF, and author’s calculations.

Perspective on how low real rates are now, and how previous forecasts have overshot the actual ex post increase in yields, in this post.

Menzie Chinn
He is Professor of Public Affairs and Economics at the University of Wisconsin, Madison

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