Treasury-TIPS 5-year break-even fell to 2.53%, but 5-year inflation is expected after adjusting for a 2.31% premium as of June 30.
Figure 1: Five-year inflation break-even calculated using 5-year Treasuries minus 5-year TIPS yields (blue), five-year expected inflation (red). Source: Treasury via FRED. Kim, Walsh & Wei (2019) after D’amico, Kim and Wei (DKW) accessed July 7, 2022 and author’s calculations.
As of June 30, the conventional calculation implies inflation 27 basis points higher than the adjusted series. The adjusted series implies that inflation expectations have indeed risen by about 50 basis points since January 20, 2021 (standard break-even implies about 43 basis points through June 30.