> if you can borrow money at a negative rate you should borrow as much as you can
True, but the treasury can't borrow at a negative rate. Actual yields are positive [1].
So called "real" yield is the actual yield minus a forward inflation component as implied by the TIPS (Treasury Inflation Protected Securities) curve. All this means is that the return you earn on owning the bond is _likely_ to be less than what inflation is projected to be. And from the Govt perspective, they will still be paying back more than they borrowed (yields are positive) but that the payback is likely to be devalued to a "real" value less than today's value.
True, but the treasury can't borrow at a negative rate. Actual yields are positive [1].
So called "real" yield is the actual yield minus a forward inflation component as implied by the TIPS (Treasury Inflation Protected Securities) curve. All this means is that the return you earn on owning the bond is _likely_ to be less than what inflation is projected to be. And from the Govt perspective, they will still be paying back more than they borrowed (yields are positive) but that the payback is likely to be devalued to a "real" value less than today's value.
http://www.treasury.gov/resource-center/data-chart-center/in...