Real Yield
A bond's nominal yield minus expected inflation — the true inflation-adjusted return a bondholder earns for lending money.
Formula
Real Yield ≈ Nominal Yield − Expected Inflation (Fisher approximation)
Real yield is what you actually earn after accounting for inflation. A 10-year Treasury yielding 4.5% with 2.5% inflation has a real yield of approximately +2.0%. If inflation is 5%, the real yield is -0.5% — the investor is losing purchasing power in real terms.
The U.S. Treasury issues TIPS (Treasury Inflation-Protected Securities), whose principal adjusts with CPI — providing a direct market quote for real yields. The 10-year TIPS real yield is the most watched measure of the real cost of capital.
Real yields matter for gold (which has no yield): rising real yields make gold less attractive relative to Treasuries, applying downward pressure. Falling or negative real yields historically correlate with gold outperformance. Real yields also directly affect equity valuations via the equity risk premium math.
Related Terms
Bond Yield
The return an investor earns by holding a bond — driven by its price, coupon, and time to maturity. Moves inversely with price.
BeginnerBreakeven Inflation Rate
The inflation rate at which a nominal Treasury and a same-maturity TIPS deliver equal returns — the market's priced-in inflation expectation.
AdvancedCredit Spread
The yield difference between a corporate (or other non-government) bond and a Treasury of the same maturity — the market's price for credit risk.
IntermediateNominal Yield
A bond's stated yield without adjusting for inflation — the face-value return before accounting for the erosion of purchasing power.
IntermediateQuantitative Easing
A Fed policy of purchasing Treasury bonds and MBS to inject liquidity, lower long-term yields, and stimulate the economy when short rates are near zero.
IntermediateReal Interest Rate
The nominal interest rate minus expected inflation — the true, inflation-adjusted return on lending or cost of borrowing.
IntermediateTIPS
U.S. Treasury bonds whose principal adjusts with CPI, so the investor is repaid in inflation-protected dollars and earns a real yield.
Intermediate