Data through: Oct 19, 2026 · updated Oct 20 · Updates: Daily (market trading days)
WThe three bars show the last 3 weeks for this indicator, oldest left to newest right. Bar height reflects each reading relative to the other two — the tallest is the highest of the three, the shortest the lowest.
Historical context: Currently in the 76th percentile of all historical readings.
What this means right now: The 5-year breakeven at 1.8–2.5% means the market expects near-term inflation close to the Fed's 2% target. This is the most common state, half of all days since 2003 (2,983 of 5,953), with neither deflation nor runaway inflation priced in for the next five years.
5-Year Breakeven Inflation Rate — the last 12 months
Every month's reading, with the band the heatmap gives it. The chart above shows the same series in full.
Month
Value
Band
Oct 2026
2.38%
Very strong reading
Sep 2026
2.36%
Very strong reading
Aug 2026
2.31%
Very strong reading
Jul 2026
2.26%
Very strong reading
Jun 2026
2.26%
Very strong reading
May 2026
2.52%
Healthy reading
Month-end readings of the same series the chart shows, from breakeven_inflation_5y. Values are the current record, not point-in-time: a month that has since been revised shows its revised value.
What is the 5yr Breakeven Inflation?
The 5-year breakeven inflation rate is the difference between the 5-year nominal Treasury yield and the 5-year TIPS (Treasury Inflation-Protected Securities) yield. It represents the market's expectation for average annual inflation over the next five years.
If the breakeven rate is 2.5%, the market expects inflation to average 2.5% annually over the next five years. Because real money is at stake, it is a market price rather than a survey answer.
The 5-year breakeven is more sensitive than the 10-year to near-term cyclical shifts, energy price moves, and supply shocks. It moves more: in about 6 months of every 10 since 2003 the 5-year moved further than the 10-year (179 of 284, through September 2026), and by roughly twice as much in the big swings of 2008, 2020 and 2021–22. The 10-year breakeven is more influenced by long-run Fed credibility and fiscal policy, and is steadier.
The Federal Reserve targets 2% inflation. A 5-year breakeven near 2% means expectations are anchored. Well above 2% means the market doubts inflation will be contained. Well below 2% — as in 2008 and the 2020 COVID crash — means the market is pricing in recession or deflation.
One caveat: breakeven rates also carry liquidity and risk premiums, so they are not pure inflation expectations. The 2008 collapse to −2.24% reflected real deflation fear, amplified by a TIPS market that had stopped working properly — it did not mean the market expected five years of −2% inflation.
How We Color-Code the 5yr Breakeven Inflation
Our heatmap colors this indicator against historically significant thresholds:
Below 0.50%
Far below target — a deflation shock priced in; 94 days since 2003, in late 2008 to early 2009 and one week of March 2020
0.50% – 1.00%
Well below target — deflation concern; 131 days since 2003, in 2008–09, four days of 2016 and the spring of 2020
1.00% – 1.50%
Below target — about 1 trading day in 8 since 2003 (12%), mostly 2008–11, 2014–16 and 2019–20
1.50% – 1.80%
Slightly below target — about 1 day in 5 since 2003 (19%), most of them in the 2010s
1.80% – 2.50%
Anchored near the Fed's 2% target — the most common state, half of all days since 2003 (50%)
2.50% – 3.00%
Slightly above target — about 1 day in 8 since 2003 (13%): 2004–08 and since 2021
3.00% – 3.50%
Elevated expectations — rare: 64 days since 2003, all in 2021–22
3.50% – 4.00%
Well above target — inflation concern; 8 days since 2003, all in March 2022
Above 4.00%
Far above target — 0 closes here since 2003; the highest close is 3.59%, on March 25, 2022
Historical Extremes — What Happened Next?
When this indicator reaches extreme levels, history shows consistent patterns:
Nov 2008GFC deflation panic
−2.24%
Deepest-ever print — markets priced outright deflation, amplified by TIPS market illiquidity during the crisis
Mar 2020COVID crash
0.14%
Collapsed toward zero as demand destruction and oil price collapse drove deflationary fears
Mar 2022Post-COVID inflation peak
3.59%
All-time high (3.59%, March 25, 2022) — 5-year expectations at their most un-anchored, driven by energy shock and supply-chain inflation
Frequently Asked Questions
What is a TIPS bond?
Treasury Inflation-Protected Securities (TIPS) are US government bonds whose principal adjusts with CPI inflation. If inflation runs at 3%, the TIPS principal grows 3%. The yield on TIPS is therefore a "real" yield — the return above inflation. The gap between nominal Treasury yield and TIPS yield is the breakeven inflation rate.
How does the 5-year breakeven differ from the 10-year?
The 5-year breakeven captures near-term inflation expectations (roughly the next five years) and is more sensitive to energy price shocks, supply disruptions, and cyclical economic swings. The 10-year breakeven reflects longer-run structural expectations — more influenced by Fed credibility and fiscal policy — and is steadier. When they diverge, the gap tells you whether the market sees inflation as a temporary blip (high 5yr, stable 10yr) or a structural problem (both high). In March 2022 the 5-year exceeded 3.5% while the 5y5y forward sat near 2.3%. The 5-year/5-year forward breakeven measures expected inflation from year 5 through year 10, stripping out the near-term swings; it is read as the cleaner measure of long-run expectations.
Why did the 5-year breakeven go negative in 2008?
During the financial crisis the 5-year breakeven fell to −2.24% on November 28, 2008 — on its face, five years of deflation. Two forces were at work: real deflation fear as the financial system froze and commodity prices collapsed, and a TIPS market that had stopped working. Investors forced to raise cash sold TIPS at distressed prices, which pushed TIPS yields up and the breakeven down. Nothing else implied five years of falling prices: CPI's yearly rate bottomed at −2.0% in July 2009 and was positive again by November 2009. The reading itself was back above zero within a week, on December 3, 2008, and above 1% by May 2009. A deeply negative reading has so far come only with that kind of TIPS squeeze.
Is 2% always the right target?
The Fed formally adopted 2% as its inflation target in 2012. Some economists argue for a higher target (3-4%) to give more room to cut rates before hitting zero. The 2% target was somewhat arbitrary but has become a global standard for developed-market central banks.
How does this differ from CPI?
CPI measures past inflation; the breakeven rate measures expected future inflation. CPI tells you where you are, and the breakeven where the market thinks you are going over the next five years. The market has not been a precise guide: in the 223 months since 2003 with five years behind them, the breakeven was above the inflation that followed in 96 and below it in 127. The typical miss was about two-thirds of a point either way (0.65).