Breakeven Inflation Rate
Definition
What is Breakeven Inflation Rate?
The difference between nominal and inflation-linked bondA bond whose principal or coupon is adjusted using an inflation measure. yields of similar maturityThe date when a debt investment's principal is scheduled to be repaid., used as a market inflationA sustained increase in the general price level, reducing the purchasing power of money. gauge.
Example in practice
How This Looks in Practice
A five-year breakeven of 12% reflects the market's priced inflation expectationThe rate of inflation households, businesses, or markets expect in the future. plus risk premiums.
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Related Terms
Gross Domestic Product
The total market value of final goods and services produced within a country during a period.
MacroeconomicsReal GDP
Gross domestic product adjusted for changes in prices.
MacroeconomicsNominal GDP
Gross domestic product measured at current prices without adjusting for inflation.
Market SentimentRisk-On Market
A market environment in which investors favour higher-risk assets.