Spread of 10 Year Treasury over CPI

CPI was reported this morning up 3.4% y/y during November.  This means that inflation is running 1.6% higher than the yield on a ten year treasury bond, which at the moment is 1.83%.  In order to put this negative spread into context, below is a chart of the spread of the ten year treasury rate to the trailing y/y CPI inflation rate since the 1950s.  Because financial assets are supposed to pay a positive real rate of return (otherwise why would a rational person invest) you’ll notice that the vast majority of the time, this should be a positive spread…

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