Bonds Analysis by James Picerno covering: United States 5-Year. Read James Picerno's latest article on Investing.com
risk is topical again, as I’ve been discussing this week. As a result, the bond market is demanding a higher yield premium to compensate for the possibility that inflation will be higher than recently expected.
The current YOI reading shows a relatively high spread in the 5-year yield over the average of the three estimates of future inflation: nearly +2.1 percentage points as of Jan. 9. Note that you can also earn a 2.0% real yield at the moment in an inflation-indexed Treasury . In effect, a nominal 5-year and an inflation-indexed 5-year yield are competitive. But that’s not always the case. In a future article I look at how the two Treasury yields available to investors compare through time with an eye on spotting opportunities in one vs. the other.
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