The recent dynamic in the Treasury Inflation-Protected Securities (TIPS) market has raised many important questions for investors and policymakers. Breakeven inflation (BEI) rates have declined consistently over the last few months, as seen in Figure 1. The zero-coupon breakeven inflation rate for a maturity of 10 years traded roughly in the range of 200 to 250 basis points (bps) from 2010 to 2013 but has declined from about 230 bps in mid-2014 to less than 150 bps at the end of January 2016.

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The Author

Vasant Naik

Head of Asset Allocation Research

Riccardo Rebonato