Given the recent interest in rising housing rates, I wanted to revisit the fundamentals that drive the bond market. Hope you enjoy this simple visual explainer.
Twenty-six years of the 10-year10-year, set by the marketFed funds, set by the FedData: FRED DGS10, DFF
Bond Fundamentals
A 10-year paying 5% is not paying 5% in real terms. TIPS pay the real part only; the gap to a normal Treasury is the market's inflation forecast.
A yield is a real return plus inflationReal returnExpected inflationData: FRED DFII10, FRED T10YIE