Breakeven Inflation Calculator
Two yields of the same term, and your view of inflation
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Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Educational estimate only. Confirm the assumptions, current rules, fees, and rounding that apply to your situation before making a decision.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter a Treasury yield for a term, such as the 10-year yield from the U.S. Treasury's daily par yield curve.
- 02
Enter the TIPS real yield for the same term from the Treasury's daily real yield curve. It can be negative.
- 03
Enter the average yearly inflation you expect over that term.
- 04
Enter an amount and the years to maturity to compare what each bond would be worth.
- 05
Read the breakeven rate, then see which bond comes out ahead at your expectation and how the answer changes across the inflation table.
Formula
Breakeven, exact = (1 + Treasury yield) ÷ (1 + TIPS real yield) − 1. Breakeven by subtraction = Treasury yield − real yield. Treasury at maturity = amount × (1 + Treasury yield) raised to the years. TIPS at maturity = amount × ((1 + real yield) × (1 + expected inflation)) raised to the years. The difference is TIPS minus Treasury. The Treasury's real return at your inflation = (1 + Treasury yield) ÷ (1 + expected inflation) − 1. Yields are treated as annual rates held to maturity, before tax.
Example
On 14 September 2026 the U.S. Treasury's 10-year par yield was 4.97% and its 10-year real yield 2.60%. The exact breakeven is 1.0497 ÷ 1.0260 − 1, or 2.31% a year; subtraction gives 2.37%. Someone expecting 2.5% inflation who invests $10,000 for 10 years would have $16,242 in the Treasury and $16,547 in the TIPS, $304 more before tax. In today's dollars at 2.5% inflation, those are $12,689 and $12,926. The Treasury's real return at that inflation rate is 2.41%, below the TIPS real yield of 2.60%. If inflation averaged 2%, the Treasury would come out $485 ahead instead.
Definitions
- Breakeven inflation
- The average inflation rate at which a nominal Treasury and a TIPS of the same maturity produce the same return.
- TIPS
- Treasury Inflation-Protected Securities, whose principal rises and falls with the CPI and which pay a fixed rate of interest on the adjusted principal.
- Real yield
- A yield measured after inflation. A TIPS yield is quoted in real terms, on top of whatever inflation turns out to be.
- Nominal yield
- A yield in dollars without any inflation adjustment, as quoted for ordinary Treasury notes and bonds.
- Inflation risk premium
- Extra yield investors may require on a nominal bond for bearing the risk that inflation turns out higher than expected.
Good to know
What breakeven inflation measures
The U.S. Treasury sells two kinds of notes and bonds that differ in one important way. An ordinary Treasury pays a fixed amount of interest in dollars, so its yield is a nominal yield: it says nothing about what those dollars will buy. A Treasury Inflation-Protected Security, or TIPS, has a principal that rises and falls with the Consumer Price Index and pays a fixed rate of interest on that adjusted principal, so its yield is a real yield, earned on top of whatever inflation turns out to be. Put a nominal yield and a real yield of the same maturity side by side and the difference between them tells you something useful. It is the average inflation rate at which the two investments would pay exactly the same. That rate is called breakeven inflation. If inflation over the life of the bonds averages more than the breakeven, the TIPS comes out ahead; if less, the ordinary Treasury does. The U.S. Treasury publishes both yield curves every business day. On 14 September 2026 the 10-year par yield was 4.97% and the 10-year real yield 2.60%. Dividing 1.0497 by 1.0260 and subtracting one gives a breakeven of 2.31% a year over the next ten years. For comparison, the CPI-U rose 3.4% in the 12 months to August 2026. The two numbers answer different questions. The CPI figure describes what prices did over the past year. The breakeven is a price set today in a market, for inflation protection over the decade ahead. A breakeven below recent inflation does not mean the market is wrong about the past; it means investors, in aggregate, are pricing lower average inflation over the coming ten years than the last twelve months delivered, along with the other factors that affect the two yields.
Exact versus subtraction, and why the gap grows
The breakeven rate is most often quoted by subtraction: the nominal yield minus the real yield. For the 14 September 2026 rates that is 4.97% minus 2.60%, or 2.37%. It is a good approximation, but it is not the rate at which the two bonds actually pay the same. To see why, think about what each bond does to a dollar over one year. The ordinary Treasury turns it into 1.0497 dollars. The TIPS turns it into 1.0260 dollars of today's buying power, which is 1.0260 times one plus inflation in future dollars. The two are equal when one plus inflation equals 1.0497 divided by 1.0260, so the exact breakeven is that ratio minus one: 2.31%. Subtraction ignores the fact that the real yield is earned on the inflated principal, not only on the original amount, so it slightly overstates the breakeven whenever yields are positive. At today's yields the difference is small, 0.06 points. It grows as yields rise. With a 10% nominal yield and a 5% real yield, subtraction gives 5%, while the exact breakeven is 1.10 divided by 1.05, minus one, or about 4.76%, a gap of nearly a quarter of a point. The same logic applies to converting any nominal return into a real one, which the real versus nominal return calculator handles. This page reports both figures because each has a use. The subtraction figure matches how breakevens are quoted in financial news and data services, so it is the number to compare with published series. The exact figure is the one to use when you are deciding between the two bonds, because it is the inflation rate at which your own money would end up the same in either. The comparison over your holding period on this page uses the exact relationship throughout, treating each yield as an annual rate held to maturity.
Reading the spread: expectations and premiums
It is tempting to read the breakeven as the bond market's forecast of inflation. It contains that forecast, but other forces are in the spread as well, and they push in opposite directions. The first is an inflation risk premium. An investor holding an ordinary Treasury bears the risk that inflation turns out higher than expected, which would erode the real value of fixed payments. Investors may demand extra yield on nominal bonds for carrying that risk. Extra nominal yield widens the spread, so this premium tends to lift the breakeven above the inflation investors actually expect. The second is a liquidity premium. The TIPS market is large, but it trades less actively than the market for ordinary Treasuries, and at times of stress it can be harder to sell TIPS quickly at a fair price. Investors may demand extra real yield for that, and a higher real yield narrows the spread, pushing the breakeven below expected inflation. The size of each premium changes over time. During periods of market stress, when investors crowd into the most liquid securities, the liquidity effect can dominate and breakevens can fall sharply even without any change in inflation expectations. When inflation is high and uncertain, the risk premium can grow. There are also technical details, such as the lag in the inflation adjustment and the TIPS guarantee of the original principal at maturity, that affect pricing at the margin. None of this makes the breakeven useless. It is still the most direct market-based measure of inflation compensation available, and it is updated every trading day. The practical reading is that the breakeven is the price of inflation protection. If you expect inflation above that price, and you want protection, TIPS are relatively attractive; if you expect less, ordinary Treasuries are.
Choosing between TIPS and ordinary Treasuries
For an investor planning to hold to maturity, the choice between a TIPS and an ordinary Treasury of the same term comes down to inflation over that term, and this page puts numbers on it. In the example, $10,000 invested for ten years grows to $16,242 in the Treasury at 4.97%. In a TIPS with a 2.60% real yield and inflation averaging 2.5%, it grows to $16,547, $304 more before tax. The table shows how quickly the answer moves with inflation. At 2% average inflation the Treasury comes out $485 ahead; at 3% the TIPS is $1,129 ahead, at 4% $2,892 and at 5% $4,813. At 0% the Treasury would lead by $3,316. The pattern is the point. The TIPS gives up a little if inflation is low and gains a lot if inflation is high, which is what insurance looks like. Many investors hold TIPS for that protection even when they expect inflation near the breakeven. Several practical differences belong in the decision. Taxes are the largest. Increases in a TIPS principal can be federally taxable in the year they occur, even though the money arrives only at maturity, which is why many investors hold TIPS in tax-advantaged accounts. TIPS carry no state or local income tax. In a deflation, the principal falls, but at maturity TreasuryDirect pays the greater of the adjusted principal or the original, so the original investment is protected. Price risk before maturity is another. Both kinds of bonds rise and fall in market value as yields change, and a bond sold early can be worth more or less than its purchase price. This page assumes both are held to maturity with interest reinvested at the same yield, and it ignores taxes. The TIPS calculator and the I bond calculator cover those details for each inflation-protected option.
Frequently asked questions
What is breakeven inflation?
It is the average inflation rate at which an ordinary Treasury and a Treasury Inflation-Protected Security of the same term would pay the same. If inflation turns out higher, the TIPS does better; if lower, the ordinary Treasury does. On 14 September 2026 the 10-year Treasury par yield was 4.97% and the 10-year real yield 2.60%, which puts the exact breakeven at 2.31% a year.
How do I calculate breakeven inflation?
The common shortcut subtracts the real yield from the Treasury yield: 4.97% minus 2.60% is 2.37%. The exact rate divides one plus the Treasury yield by one plus the real yield and subtracts one, which gives 2.31%. The difference, 0.06 points here, grows as yields rise.
Should I buy TIPS or regular Treasuries?
On yield alone, it depends on whether you expect inflation above or below the breakeven. In the example, $10,000 in the 10-year Treasury grows to $16,242. In a TIPS with a 2.60% real yield and 2.5% inflation it grows to $16,547, $304 more before tax. At 2% inflation the Treasury would be $485 ahead, and at 3% the TIPS would be $1,129 ahead. TIPS also protect against an inflation surprise you did not expect, which has value of its own.
Is breakeven inflation the market's forecast?
Not exactly. Ordinary Treasury yields can include extra compensation for the risk that inflation surprises upward, which lifts the breakeven. TIPS trade less actively, and buyers may demand extra real yield for that, which pushes it down. The spread is best read as the market price of inflation protection, with expectations as its largest part.
What happens to TIPS if prices fall?
A TIPS principal falls with deflation, and interest is paid on the lower principal. At maturity, TreasuryDirect pays the inflation-adjusted principal or the original principal, whichever is greater, so you never get back less than the original principal. This page does not add that floor back, so in a deflation case it slightly understates the TIPS result.
How are TIPS and Treasuries taxed?
The comparison here is before tax. Increases in a TIPS principal can be federally taxable in the year they occur, even though you receive them only at maturity, and TIPS carry no state or local income tax. The TIPS calculator covers that tax in detail.