US Stagflation Risk Dashboard as of 25 Aug 2025

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Takeaway: Probability mix updated weekly using breakevens, real yields, the curve and HY OAS. Week over week: 10Y breakeven +3.0 bps, 10Y real yield -2.0 bps, 2s10s curve change -3.0 bps, HY OAS +7.0 bps.

EXECUTIVE SUMMARY

What changed since last week.

Minor changes since last week, so charts will look about the same

• Inflation compensation: 10Y breakeven +3.0 bps to 2.41 (%), 5Y +6.0 bps to 2.48.

• Real rates: 10Y TIPS -2.0 bps to 1.94 (%), 5Y TIPS -2.0 bps to 1.42 (%).

• Curve: 2s10s changed -3.0 bps to 0.54 (% points).

• Credit risk: HY OAS +7.0 bps to 2.95 (%).

• CPI: No new monthly print since the prior report; CPI panel unchanged week over week by design.

Implications

• 5y5y Forward slightly higher breakevens with softer real yields tilt mildly inflation-first versus last week, but magnitudes are small.

• 2s10s Yield Curve move is modest; watch for re-steepening led by long-end selloff paired with firm breakevens as a stagflation signal.

• HY spread widening bears watching; a persistent move higher would increase recession-first odds.

Breakeven Inflation and 5y5y Forward

Insight: Breakevens moved this week:  5Y +6.0 bps and 10Y +3.0 bps. A rising 5y5y forward would flag persistence of inflationary risk; watch for moves sustainably above 2 to 2.5 percent.

CPI YoY (Headline CPI-U, SA)
Insight: Headline CPI YoY guides realized inflation pressure. CPI is monthly; no new print since the prior report. Chart unchanged week over week by design.

TIPS Real Yields
Insight: Real yields eased this week — 5Y -2.0 bps, 10Y -2.0 bps. Higher real rates tighten conditions; declines can cushion growth if breakevens stay anchored.

2s10s Yield Curve Spread

Insight: The 2s10s curve changed by -3.0 bps w o w (level now roughly 10Y minus 2Y). Re-steepening via higher long rates with sticky breakevens would lean stagflationary

High Yield OAS

Insight: HY OAS widened +7.0 bps this week. Sustained widening would signal rising growth stress and tighter financial conditions.

Sources: BLS CPI (CUSR0000SA0; fallback FRED CPIAUCSL). FRED: T5YIE, T10YIE, DFII5, DFII10, DGS2, DGS10, BAMLH0A0HYM2.

 


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