Real yields on Treasury Inflation-Protected Securities are at their highest levels since before the Covid pandemic, according to Mark Hulbert’s July 2026 MarketWatch analysis.
He argues that current levels may compress if inflation expectations fall or the Federal Reserve cuts rates, narrowing the window to lock in a generous payout.
A Treasury Inflation-Protected Security, or TIPS, differs from a traditional Treasury in one key way. Unlike a nominal bond that pays a fixed interest rate, a TIPS adjusts its principal value in step with the Consumer Price Index every month.
If inflation rises 3% over a year, the principal you hold rises by 3% as well, and your interest payments grow along with it.
The 10-year TIPS real yield has more than doubled its decade average
The 10-year TIPS real yield recently stood at about 2.1%, more than double the 10-year average of 0.9%, MarketWatch reported. The one-year real yield has been even more striking at 2.2%, compared with a decade average of just 0.3%, the report noted.
As of the July 17, 2026 market close, TIPS real yields stood at 2.01% at five years, 2.31% at 10 years, and 2.87% at 30 years, according to the U.S. Treasury’s Daily Par Real Yield Curve Rates.
Elevated yields span the maturity spectrum from five to 30 years, giving investors multiple entry points.
Why a TIPS ladder could reshape your retirement math
A 30-year TIPS ladder now produces a guaranteed inflation-adjusted withdrawal rate of about 4.9% per year, with a real yield of 2.7% annualized, MarketWatch reported.
Earlier this decade, the comparable withdrawal rate was only slightly above 4%, the report noted.
TIPS ladders now outperform traditional retirement withdrawal benchmarks, Wealth Logic founder Allan Roth wrote for ETF.com.
I’ve challenged the financial services industry to solve the safe withdrawal rate, as a 30-year TIPS ladder now produces a 4.5% inflation-adjusted cash flow. iShares and LifeX have made progress…
Morningstar research published in 2026 reinforced those findings, concluding that a 30-year TIPS ladder supports an inflation-adjusted withdrawal rate of 4.8%, compared with 3.9% for the highest-performing traditional portfolio strategy the firm studied.
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Cleveland Fed data show rising inflation expectations
The Cleveland Fed’s inflation expectations model draws on Treasury yields, Consumer Price Index data, inflation swaps, and survey-based measures to project inflation over horizons from one to 30 years, the Federal Reserve Bank of Cleveland explained.
The inflation swap market alone carries a notional value in the trillions of dollars, and the TIPS market itself is estimated at about $2 trillion, Mark Hulbert noted in MarketWatch.
The Cleveland Fed’s own Survey of Firms’ Inflation Expectations found that chief executives expected Consumer Price Index inflation of 3.7% over the following 12 months as of the second quarter of 2026, up from 3.1% in the first quarter, the Cleveland Fed reported.
Business leaders are paying more attention to inflation protection than they were a year ago.
TIPS have risks every buyer needs to understand
Collin Martin, head of Fixed Income Research and Strategy, Schwab Center for Financial Research, explained that TIPS share two risks with conventional bonds, even though they eliminate inflation risk, Schwab’s research noted.
The first is interest-rate risk. When real yields rise, TIPS prices fall in the secondary market, and investors who sell before maturity can lock in a loss, Martin explained.
More Federal Reserve:
- Top economist delivers blunt Fed rate warning for 2026
- Inflation flips Wall Street’s Fed interest-rate bets
- BofA flips the script with bombshell Fed interest-rate outlook
During the broad bond market sell-off of 2022, TIPS suffered steep price declines alongside conventional Treasuries, even as inflation ran at multi-decade highs, the Schwab analysis showed.
The second risk is credit quality, since all three major rating agencies have stripped the U.S. of its top credit rating. S&P cut to AA+ in 2011, Fitch to AA+ in 2023, and Moody’s to Aa1 in May 2025, Forbes contributor William Baldwin noted.
“We don’t think you’d get stiffed,” Martin told Forbes, though he acknowledged that chronic budget deficits are difficult to ignore.
The phantom income tax trap and how to avoid it
If you buy TIPS in a standard brokerage account, the Internal Revenue Service taxes the annual inflation adjustment to your principal as ordinary income, even though you do not receive the cash until the bond matures, Raymond James explained.
Financial professionals call this “phantom income,” creating a tax bill on money you have not collected.
Holding TIPS inside a tax-deferred account like a traditional individual retirement account or 401(k) eliminates the problem, because all income is deferred until withdrawal, Martin noted.
The window for elevated TIPS yields may not last
If inflation expectations fall or the Federal Reserve begins cutting rates aggressively, real yields on newly issued TIPS would likely compress, reducing the purchasing power premium available to future buyers, Martin explained.
Investors who lock in current yields by holding individual bonds to maturity keep their elevated real return, regardless of where rates move afterward, the Schwab analysis indicated.
For years, inflation has eaten into returns on cash, CDs, and traditional bonds. A government-backed yield above 2% after inflation is something savers haven’t reliably been able to access in more than a decade.
Related: Bond traders drastically shift Fed rate-hike bets
