TIPS liquidity, breakeven inflation, and inflation expectations
Estimating market expectations for inflation from the yield difference between nominal Treasury bonds and Treasury inflation-protected securities-a difference known as breakeven inflation-is complicated by the liquidity differential between these two types of securities. Currently, the extent to which liquidity plays a role in determining breakeven inflation remains contentious. Information from the market for inflation swaps provides a range for the possible liquidity premium in TIPS, which in turn suggests a range for estimates of inflation expectations that is well below the widely followed Survey of Professional Forecasters inflation forecast.
Volume (Year): (2011)
Issue (Month): june20 ()
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- Jens H. E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2010.
"Inflation Expectations and Risk Premiums in an Arbitrage-Free Model of Nominal and Real Bond Yields,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 42(s1), pages 143-178, 09.
- Jens H. E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2009. "Inflation expectations and risk premiums in an arbitrage-free model of nominal and real bond yields," Proceedings, Federal Reserve Bank of San Francisco, issue Jan.
- Jens H. E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2008. "Inflation expectations and risk premiums in an arbitrage-free model of nominal and real bond yields," Working Paper Series 2008-34, Federal Reserve Bank of San Francisco.
- Jens H.E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2012. "Extracting Deflation Probability Forecasts from Treasury Yields," International Journal of Central Banking, International Journal of Central Banking, vol. 8(4), pages 21-60, December.
- Jens H. E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2011. "Extracting deflation probability forecasts from Treasury yields," Working Paper Series 2011-10, Federal Reserve Bank of San Francisco.
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