QUICK DEFINITION
Breakeven Inflation is the difference between the yield on a nominal government bond and an inflation-linked bond of similar maturity.
WHY IT MATTERS
Why Breakeven Inflation matters in bond markets
It is widely used as a market-based gauge of expected inflation plus inflation risk and liquidity premia.
MARKET CONTEXT
How to think about it
Bond investors use breakeven inflation as part of a wider framework that links prices, yields, cash flows, liquidity and risk. The concept should therefore be read together with its related terms rather than as an isolated definition.
Is Breakeven Inflation important for fixed-income investors?
← Back to the Bond Market Glossary Yes. It is widely used as a market-based gauge of expected inflation plus inflation risk and liquidity premia.