Real 10-Yr Treasury Rate Highest since April 2016

(Negative) The real 10-year treasury rate was 1.23 percent in Decemer 2016, which was an increase of 24 basis points from last month. This was the highest real rate since April 2016. The nominal rate currently sits  249 basis points, which is the highest since September 2014. But, the rate of inflation also has been rising. In December, inflation was above 2 percent for the first time since June 2014. Increasing inflation is limiting the rise in the real 10-year treasury rate (the real rate is the nominal rate minus inflation). 

The year-over-year change in the real rate increased to -89 basis points. That was the second straight month of an increase. 

The 10-year treasury rate is good leading indicator of the money supply, housing permits, consutrction spending, and consumer durable goods spending. A falling real interest rate should lead to more housing permits, construction spending, and consumer durable goods spending. This means that the real 10-year treasury rate is now a negative leading indicator for capital spending.