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Key Points:
5-year inflation expectations measured by the University of Michigan’s Survey of Consumers have moved closer to market-based views in recent months, though survey respondents continue to expect significantly more inflation in coming years.
- In the chart below, the market-based breakeven inflation rate is derived by subtracting the 5-year TIPS (Treasury Inflation-Protected Securities) yield from the 5-year Treasury note yield.
Inflation Expectations
Conforming mortgage rate spreads over the 10-year Treasury (10YT) have fallen to the lowest levels since 2022 in recent weeks as investors bet on normalizing monetary policy.
- The prospect of rate cuts has driven 2-year Treasury (2YT) yields sharply lower over 2025 causing some steepening in the yield curve.
- Conforming mortgage spreads over the 10YT have contracted by nearly 100 basis points from peak levels seen in 2023.
Mortgage Rates and Treasury Yields
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