The Fed's H.15 data shows that as of August 5th, the 30-year nominal Treasury yield was 5.17%, and the 30-year TIPS real yield was 2.96%, corresponding to a break-even inflation rate of approximately 2.21%.
The truly important factor is the composition of the yield increase. DoubleLine calculations show that since the end of 2023, the 30-year nominal yield has risen by 114 basis points, with the real yield rising by 107 basis points, while long-term inflation compensation has only increased by about 7 basis points. In other words, this round of long-term bond sell-offs is not due to a sudden market belief that inflation will spiral out of control over the next 30 years, but rather to investors demanding higher "real returns": fiscal deficits, government bond supply, policy uncertainty, and capital demands from sectors such as AI, energy, and defense have collectively driven up the price of long-term funds.
This is more problematic for risk assets than simply rising inflation. A 30-year real risk-free rate approaching 3% directly increases the discount rate for stocks, real estate, and long-term investment projects, with high-valuation growth assets facing particularly significant valuation barriers. However, breakeven inflation is not purely "inflation expectations," but also includes inflation risk and liquidity premium; therefore, the conclusion is that the biggest pressure on US long-term bonds at present comes from real interest rates and term premium, rather than the loss of anchor in long-term inflation expectations.
