Sensitivity to priced-in inflation
How much a holding's price moved, on average, for each +0.10 percentage points in the inflation the bond market prices over the next ten years.
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Where it misleads
It describes one holding in one window; it is not a duration and not a promise. A low R² (below about 0.15) means the slope describes a cloud of points, not a relationship, and a firm one in one window can fade in the next. Priced-in inflation is a market price, not the inflation that happens, so a holding can move with it and still not follow actual inflation.
Compared with
- Inflation priced in — the market measure this one is set against
- Real yield — the other Treasury measure a commodity panel shows
- Rate sensitivity — the same method, against the nominal 10-year yield and flipped to read like a duration
How it is computed here
The holding's daily returns over its last two years of sessions are set against the daily change in priced-in inflation: the nominal 10-year Treasury yield minus the real one, both from the Treasury's own daily curves. One day of lag is added for products that close before the Treasury publishes. The slope is the move per +0.10 points and keeps its sign: positive means it rose on days priced-in inflation rose. The R² beside it says how much of its daily moves priced-in inflation explains.
Worked example
- AUV's 484 daily returns, from 26 Jan 2023 to 31 Dec 2024, are set against the daily change in the 10-year priced-in inflation (the nominal 10-year Treasury yield minus the real one) on the same days.
- On days priced-in inflation rose 0.10 points, AUV moved −0.09% on average, with the reaction of the following day included.
- R² is 0.00: priced-in inflation explains that share of its daily moves, and the slope means little below about 0.15.
Demo portfolio: seven invented holdings, generated prices, measured by the real engine. Past returns do not predict future ones.
Where it misleads
It describes one holding in one window; it is not a duration and not a promise. A low R² (below about 0.15) means the slope describes a cloud of points, not a relationship, and a firm one in one window can fade in the next. Priced-in inflation is a market price, not the inflation that happens, so a holding can move with it and still not follow actual inflation.
What it measures
- rt — the holding's return on day t, from its own prices in its own currency;
- π — priced-in inflation: the 10-year nominal Treasury yield minus the 10-year real (TIPS) yield, in percentage points;
- Δπt — its change from the day before;
- b0, b1 — the reaction the same day and the next; the slope shown is b = b0 + b1;
- a — a constant, and εt — whatever priced-in inflation does not explain.
The panel shows b × 0.001, the average move for +0.10 points of priced-in inflation, with the R² of the whole regression beside it, over the last two years of sessions.
How to read it
- The sign. Positive means the holding rose on days priced-in inflation rose. Unlike the rate sensitivity, it is not flipped: this is not a duration.
- The R². The share of its daily moves priced-in inflation explains. Below about 0.15 the slope describes a cloud of points, not a relationship.
- The window. Two years of sessions. Another window can give another number.
- What it is not. Priced-in inflation is a price in the bond market. It is not the inflation that happens, and nothing here says how a holding will move next.
Where the worked example comes from
On a signed-in page it is your own commodity holding, with the same number as its position panel. Without one, it is a real product, measured on its stored daily prices and the Treasury's two curves.
Compared with
- Inflation priced in — the market measure this one is set against
- Real yield — the other Treasury measure a commodity panel shows
- Rate sensitivity — the same method, against the nominal 10-year yield and flipped to read like a duration
Questions people ask
Does a positive number mean the holding follows inflation?
No. It means that over that window the holding rose on days priced-in inflation rose, by that much on average. Priced-in inflation is a price in the bond market, not the inflation that happens, and the relationship can change from one window to the next.
Why is the R² usually low?
A commodity's daily moves come from many things at once, such as supply, the dollar and the appetite for risk, and the inflation priced in by the bond market is only one of them. A low R² is common, and it is why the number is shown with its R² and never alone.
Why can a European product show a different figure?
Because it closes before the US Treasury publishes its curve. The measure adds one day of lag for that, so a reaction that lands the next day is counted too.
Sources
- U.S. Department of the Treasury: daily par yield curve and daily real yield curve
- Dimson, E. (1979), Risk measurement when shares are subject to infrequent trading, Journal of Financial Economics
Last reviewed 2 Oct 2026 by Sphinx Risk.