Breakeven Inflation Rates

The break-even inflation rate (BEI) is generally higher in:

Bingo! With long-term bonds, there is additional uncertainty about future inflation rates compared to short-term bonds. The BEI for long-term bonds will generally be higher.

No. Consider that the BEI is compensation for expected inflation, as well as the risk of inflation. Developed economies tend to have lower rates of inflation, as well as greater stability.

Not so. The BEI measures the market's best estimate at future inflation, so when inflation is falling, the BEI should be ahead of this trend in expectation. This is observed in periods of falling inflation.

longer-term bonds.

developed economies.

declining inflation environments.