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The Steepening Real Yield Curve: What Does It Mean For TIPS Investors?

Feb. 25, 2021 6:13 PM ETiShares TIPS Bond ETF (TIP)SCHP, VTIP
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If you follow the bond market at all, you know that longer-term nominal yields have been inching higher since the beginning of the year, and longer-term real yields (meaning yields above inflation) have been climbing, too. But the action has been primarily focused on the 10+-year maturities, and that means that the yield curve is steepening.

These moves higher in the longer terms are pretty dramatic in just two months, but at the same time, the shorter-term yields have actually declined. Here’s a chart comparing the Treasury’s real yield estimates for 5-, 10- and 30-year TIPS over the last 5+ years, with the simultaneous changes in the Federal Funds Rate during that period:

real yields comparison

What does this mean for the TIPS market? Read my full analysis on Tipswatch.com.

Analyst's Disclosure: I am/we are long VTIP, SCHP.

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