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What is a real yield?

In one line: A real yield is the return on a bond after inflation is taken out. Roughly, it's the normal yield minus the expected inflation rate.

Trading glossary · Updated 2026-10-21

A simple example

A 10-year Treasury pays a yield of 4.2% a year. That's the nominal yield, the number you see quoted.

Now say people expect Inflation to run at 2.3% a year. The rough real yield is:

4.2% − 2.3% = 1.9%

So after rising prices, the bond holder's buying power grows about 1.9% a year. If inflation were 5% instead, the real yield would be about −0.8%. The bond would pay, but money would buy less each year.

Where to see it

The US government sells TIPS, Treasury Inflation-Protected Securities. Their yield is a market-based real yield, because the bond's value already adjusts for inflation. Financial sites often show the 10-year TIPS yield next to the normal 10-year yield.

The gap between the two is called the breakeven inflation rate. It's roughly what the market expects inflation to be.

Why it matters

Real yields affect almost everything that competes with bonds:

• Gold pays nothing. When real yields rise, holding gold costs you more in missed interest, and gold often struggles. The link is loose and breaks at times.
• Growth stocks are valued on profits far in the future. Higher real yields tend to weigh on them.
• The dollar often firms when US real yields rise compared with other countries.

More on this in how interest rates affect stocks and on the US 10-year Treasury yield page.

A common mistake

Looking only at the nominal yield. A 5% yield sounds high. With 6% inflation, it's a negative real yield. A 3% yield with 1% inflation is better in real terms.

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