Wendy,

I think you're oversimplifying. Yes, over the last few days, the inflation differential has dropped, but it went up after then high inflation number for January by at least 30 basis points for 5-years, and if I remember right it was briefly below 2.3% on 5 or 10 years when CPI-U took a nose dive a few months ago. Both 5 and 10 years have hovered in the 2.4%-2.6% range for most of the last couple of years, since I started watching, with the occasional spike or drop off.

The current real return on TIPS is low by historical real return standards, but not dramatically low (a year ago, 5 year TIPS were less than 1% above inflation). As 2Old showed us, real return on Treasuries, and even Fed Rate, are volatile, so average isn't any more meaningful than average return on a stock index.

We've been hearing predictions that long bond yields, meaning real return, will go up for a while now (except from tose who predict they will go down). So far, there has been enough money out there to service debt and keep rates low, and I don't see anything to change this in the medium term, though there are lots of things that could happen to drive yields on direction or the other. I do continue to believe at some point debts have to be paid and when the SS surplus stops subsidizing the national debt some of the free cash will be gone, but that's not going to happen until after the next prsidential election.