On 6 October 2026, the US 10-year breakeven inflation rate was 2.36%. That is the average yearly inflation over the next ten years built into the prices of US government bonds. Today's inflation is higher. US consumer prices rose 3.4% in the year to August 2026. So bond prices point to inflation cooling over the next ten years.
The breakeven comes from comparing two kinds of bond issued by the US Treasury. One pays a fixed return. The other is protected against inflation. Here is how it is worked out, how it has moved since 2003 and how it compared with the inflation that followed.
What is breakeven inflation? Breakeven inflation is the yield on an ordinary US Treasury bond minus the yield on an inflation-protected Treasury bond of the same term. It is the average yearly inflation rate at which the two bonds would pay the same.
The 10-year breakeven was 2.36% on 6 October 2026. Since 2003, it has ranged from 0.04% in November 2008 to 3.02% in April 2022.
It is built on the Consumer Price Index. The Fed's 2% goal uses a different price index, which has run a mean of 0.36 percentage points lower since 2000.
From 2003 to 2016, the 10-year breakeven averaged 2.11%. Inflation over the next ten years averaged 2.22%. In any one month, the breakeven missed by a mean of 0.62 percentage points a year.
What is breakeven inflation?
The US Treasury sells two kinds of 10-year bond. An ordinary Treasury bond pays a fixed rate of interest. Inflation eats into what that interest will buy.
Treasury Inflation-Protected Securities (TIPS) are the second kind. Their principal, the amount repaid at the end, rises in line with the Consumer Price Index (CPI). The CPI is the US government's monthly measure of the prices consumers pay, explained in What Is CPI?
So a TIPS yield is a real yield: the return above inflation. We explain real yields in What Is a Real Interest Rate?
The breakeven inflation rate is the gap between the two yields. On 5 October 2026, the ordinary 10-year Treasury yield was 5.31%, according to FRED, the St. Louis Fed's free data site. The 10-year TIPS yield was 2.95%.
The gap was 2.36 percentage points. FRED's breakeven series was still 2.36% on 6 October.
The name comes from the trade-off. If inflation averages more than 2.36% a year over the ten years, the TIPS holder ends up ahead. If it averages less, the ordinary bond pays more. At 2.36%, the two break even.
The 10-year breakeven inflation rate since 2003
Source: FRED (T10YIE); YX Insights
The chart shows the 10-year breakeven every trading day since 2 January 2003. Its median was 2.23%. It sat between 2% and 3% on 68% of days.
Three episodes stand out:
2008. The rate fell to 0.04% on 20 November 2008, during the financial crisis. CPI inflation did turn negative, reaching −2.1% in July 2009.
2020. It fell to 0.50% on 19 March 2020, in the first weeks of the pandemic. CPI inflation dropped to 0.1% in May 2020.
2022. It peaked at 3.02% on 21 April 2022. CPI inflation went on to peak at 9.1% in June 2022.
5-year breakeven vs the 5-year, 5-year forward rate
The same sum works for five-year bonds. On 5 October 2026, the 5-year Treasury yield was 5.06%. The 5-year TIPS yield was 2.70%. That gives a 5-year breakeven of 2.36% on 5 October. By 6 October, it was 2.37%.
A third measure looks further out. The 5-year, 5-year forward inflation rate is the average inflation priced in for the five years that start five years from now, so years 6 to 10. It is worked out from the 5-year and 10-year breakevens.
Source: FRED (T5YIE, T5YIFR); YX Insights
The 5-year breakeven swung from −2.24% on 28 November 2008 to 3.59% on 25 March 2022.
The forward rate moved less. It sat between 2% and 3% on 81% of days. The 5-year breakeven did so on 51% of days.
The 5-year rate covers the nearer years. Its low came in November 2008, months before CPI inflation turned negative in 2009. Its high came in March 2022, as CPI inflation climbed towards its 9.1% peak in June.
Breakeven inflation vs the inflation that followed
A breakeven can be checked once its years have passed. We set each month's average 10-year breakeven against CPI inflation over the next ten years, as a yearly rate. We used the raw CPI that TIPS use, before it is smoothed for price patterns that repeat each year.
That allows 163 starting months, from January 2003 to August 2016. October 2015 is left out, because the CPI for October 2025 was never published.
Source: FRED (T10YIE, CPIAUCNS); YX Insights
On average, the two were close. The breakeven averaged 2.11%. Inflation over the following ten years averaged 2.22%.
Month by month, the gap was larger. The breakeven was off by a mean of 0.62 percentage points a year.
The misses came in stretches. From January 2004 to September 2008, the breakeven ran above the inflation that followed in 55 of 57 months. From October 2008 to May 2009, during the financial crisis, it ran below in all 8 months. It reached 0.25% in December 2008, against 1.80% that followed.
From 2012, the breakeven ran below in 54 of 55 months. The later ten-year spans include the 2021 to 2023 surge.
The biggest miss came in February 2016. The breakeven was 1.31%, while inflation over the next ten years averaged 3.26%. The biggest miss the other way came in July 2008: 2.44%, against 1.37%.
Measure | Starting months | Mean breakeven | Mean CPI inflation over the term that followed | Mean miss (either way) | Months with inflation above the breakeven | Biggest miss |
|---|---|---|---|---|---|---|
10-year breakeven | 163 (January 2003 to August 2016) | 2.11% | 2.22% | 0.62 percentage points a year | 51% | February 2016: 1.31% against 3.26% |
5-year breakeven | 223 (January 2003 to August 2021) | 1.84% | 2.49% | 1.02 percentage points a year | 58% | May 2020: 0.77% against 4.63% |
Source: FRED (T10YIE, T5YIE, CPIAUCNS); YX Insights
The table adds the 5-year breakeven, tested the same way over 223 starting months. It missed by more: a mean of 1.02 percentage points a year. Inflation came in above it in 58% of months.
One limit applies to both tests. The starting months overlap, so they share most of their years. The data from January 2003 to August 2026 hold only two separate ten-year spans.
Why breakeven inflation is not a pure forecast
The breakeven is a gap between two bond yields. Things other than expected inflation can move that gap.
An inflation risk premium. Holders of ordinary bonds may want extra yield in case inflation surprises on the upside. That pushes the breakeven up. A 2008 Federal Reserve paper by D'Amico, Kim and Wei says this premium "complicates the interpretation" of the breakeven.
A liquidity premium. TIPS trade less than ordinary Treasuries, so buyers may ask for a higher yield. That pushes the breakeven down. The same 2008 paper found this premium had been "quite large (~ 1%)" until shortly before it was written.
Crisis selling. The 2008 crisis caused "a flight by investors to very safe and highly liquid assets", according to a 2010 San Francisco Fed letter by Jens Christensen. It said this could "seriously distort" breakeven readings.
Breakeven inflation today against the Fed's 2% target
On 6 October 2026, the 10-year breakeven was 2.36%. The 5-year breakeven was 2.37%. The 5-year, 5-year forward rate was 2.35%.
The Fed's 2% goal is set on a different measure, the Personal Consumption Expenditures (PCE) Price Index. We explain the choice in Why Does the Fed Target 2% Inflation? Since 2000, CPI inflation has run a mean of 0.36 percentage points above PCE inflation, as we showed in What Is Inflation?
By our own sum, 2% on PCE is about 2.36% on CPI. That is close to the breakevens of 6 October 2026. The sum is ours, not a Fed figure. The breakeven also carries the premiums described above.
In August 2026, CPI and PCE inflation were both 3.4%. That month, CPI did not run above PCE.
Through 2026, the 10-year breakeven has stayed between 2.18% and 2.50%.
How to read breakeven inflation
Find it on FRED. FRED publishes the 10-year breakeven daily as T10YIE. The 5-year is T5YIE. The forward rate is T5YIFR.
Remember the price index. Breakevens are on CPI. The Fed's target is on PCE, which has run lower.
Check the real yield. A rise in the 10-year yield can come from the real yield or the breakeven. From 2 January to 5 October 2026, the 10-year yield rose 1.12 percentage points, from 4.19% to 5.31%. The TIPS yield gave 1.01 percentage points of that, rising from 1.94% to 2.95%. The breakeven gave 0.11. We explain the 10-year's place in What Is the Yield Curve?
Take care in a crisis. The lows of 2008 and 2020 came in crises, when TIPS prices can be distorted.
Breakeven inflation is the ordinary Treasury yield minus the TIPS yield: the inflation priced into bonds. At 2.36% on 6 October 2026, it sat close to the Fed's 2% goal once the CPI gap is allowed for. As a forecast, it has been close on average but often wrong.
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Common questions about breakeven inflation
How is breakeven inflation calculated?
Breakeven inflation is the yield on an ordinary US Treasury bond minus the yield on a Treasury Inflation-Protected Security (TIPS) with the same term. On 5 October 2026, the 10-year Treasury yielded 5.31%. The 10-year TIPS yielded 2.95%. The difference, 2.36%, was the 10-year breakeven inflation rate.
What is the 10-year breakeven inflation rate now?
The US 10-year breakeven inflation rate was 2.36% on 6 October 2026, according to FRED, the St. Louis Fed's data site. A year earlier, on 6 October 2025, it was 2.34%. In 2026, it has stayed between 2.18% and 2.50%. Its lowest since the series began in 2003 was 0.04%, in November 2008.
Is breakeven inflation a good predictor of inflation?
Breakeven inflation has been close on average but often wrong in any one month. For starting months from 2003 to 2016, the 10-year breakeven averaged 2.11%, while inflation over the next ten years averaged 2.22%. Month by month, it was off by a mean of 0.62 percentage points a year.
What is the 5-year, 5-year forward inflation rate?
The 5-year, 5-year forward inflation rate is the average yearly inflation priced into US government bonds for the five years starting five years from now. It is worked out from the 5-year and 10-year breakeven rates. FRED, the St. Louis Fed's free data site, publishes it daily as T5YIFR. It was 2.35% on 6 October 2026.
DISCLAIMER: This article is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.