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The real yield is the price that balances the demand and supply of savings.
That break-even rate is calculated by subtracting the real yield on TIPS from the yield on regular Treasuries.
On this crude measure, the real yield on these government bonds that is, after adjusting for inflation has barely budged.
When those securities were auctioned last week, buyers agreed to accept a real yield of negative 1.496 percent.
America would derive zero benefit from the first effect; the real yield on the 20-year Treasury is now...0.0%...0.0%
The British inflation-linked gilt that is due to mature in 2016 trades on a negative real yield.
Fiscal policymakers should also realize the very low real yield on government bonds is a signal that more debt can be absorbed.
If inflation averages 1.5% over the next two years, and the Fed keeps short rates at 0.5% or less, then the real yield on cash will be -1%.
And at last month's auction of 10-year Treasury inflation-protected bonds, investors accepted a real yield of negative 0.046 percent.
Take a bond with a 2% real yield maturing in ten years' time; the bond will pay an initial $20 on a face value of $1,000.
Roger Lowenstein does a terrible disservice to investors by comparing the paltry 2.58 percent real yield on bonds with the 8.5 percent earnings yield on stocks.
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