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In This Part of the U.S. Bond Market, 0% Is High and Alarming

  • Real yield, negative for past two years, approaches threshold
  • Aggressive Fed stance erodes demand for inflation protection
The Marriner S. Eccles Federal Reserve building in Washington, D.C.

The Marriner S. Eccles Federal Reserve building in Washington, D.C.

Photographer: Stefani Reynolds/Bloomberg

The U.S. bond market is hurtling toward the clearest sign yet that the Federal Reserve’s shift into a hawkish gear is making a difference -- a real 10-year interest rate higher than 0%.

While all Treasury yields have climbed this year as the Fed began what’s expected to be an aggressive series of rate increases aimed throttling high inflation, in the past two weeks the baton has been passed to inflation-protected notes and bonds. Their yields are termed “real” because they represent the rates investors will accept as long as they are paired with extra payments to offset inflation.