What is the Real Yield on Treasuries? (SHY, IEI, IEF)

With many worried about hyper inflation due to endless bailouts and government spending why are treasury yields fairly low and have actually fallen over the past several months?

Most likely the answer is in the short to intermediate term (less than 7 years or so) deflation is a bigger threat than inflation. For instance over the past year CPI (the measure of consumer goods inflation) has decreased 1.5%, therefore if a 10 year Treasury yielded 4%, your real return would actually be 5.5%. Add in some capital gains you would be looking at upper single digit/low teen total return.

This is what we could be seeing with short to intermediate term bonds now. If deflation or at least little or no inflation is the rule for the next couple of years short to intermediate term treasuries could be priced for a 5% - 7% real total return over the next several years. Investors can easily invest in short-intermediate term treasuries through IShares 1-3 Yr. ETF (NYSE: SHY), IShares 3-7 Yr. ETF (NYSE: IEI), and IShares 7-10 Yr. ETF (NYSE: IEF).

Once beyond 5-7 years however, inflation may indeed be a LARGE concern, so I would avoid treasuries longer than 10 years in maturity.