Studying history promises no short cut to easy profits, but it does provide some intriguing perspective at times. The last six months or so is one of those times. We’re speaking here of the real or inflation-adjusted rate on the 10-year Treasury yield. By our somewhat subjective calculation (more about that below), this real yield has gone negative in recent months, which is to say that owning a 10-year Treasury bond leaves owners with less than nothing after deducting inflation.
The negative real yield in the 10 year isn’t unprecedented, although as the chart above reminds it’s a fairly rare occurrence. Back in 2005, the real yield went negative in September, but that was a one-time flirtation with life below zero. The last sustained dive into negative territory came during a two-year stretch in 1978-1980. Of course, that was a time when inflation was taking a toll on fixed-rate investments and the country was grappling with high energy prices. (Sound familiar?)