The chart below compares the 10-year zero coupon US treasury yield with the 10-year zero coupon inflation swap rate. The difference is the implied 10-year zero coupon real rate (h/t Greg Trotter who will be writing a guest post on the topic) - which is becoming increasingly negative. We are not in a stagflation environment yet, but this indicator is certainly starting to point in that direction.
|10-year zero coupon US treasury yield (orange) and the 10-year zero coupon inflation swap rate (white)|
Just to put things on perspective, the CRB Commodity Index broke through 300 today and is now up 14% from the lows. As inflation expectations pick up (due to increasing rents and rising commodity prices), this push into the negative real rate territory is only going to get worse.
|CRB Commodity Index|