One-year Treasury yields fell below inflation in April and May, then rose back above it

A one-year Treasury note yielded 3.72% on April 30 while consumer prices were 3.78% higher than a year earlier, so cash held to maturity would have lost purchasing power. The yield was 3.79% on May 29 against 4.17% inflation. By September 30 the picture had reversed: the one-year yield was 4.54% and inflation 3.72%. The US Treasury's daily yield data and the consumer price index published by the St. Louis Fed show the gap between the two moved by 1.20 percentage points in four months (computed).

From a full point of cushion to a shortfall

The comparison takes the one-year par yield on the last trading day of each month and the 12-month change in the consumer price index (CPI-U, seasonally adjusted) for the same month. It ignores taxes and the fees any account may charge, and it compares a rate known in advance with a price change measured afterward.

On January 30 the one-year yield was 3.48% and inflation 2.39%, a gap of 1.09 percentage points in cash's favor (computed). On February 27 the yield was unchanged at 3.48% and inflation 2.43%, a gap of 1.05 points. Then prices moved. The index rose from 327.460 in February to 330.293 in March, a gain of 0.87% in one month (computed), and reached 333.979 in May, 1.99% above February (computed). Annual inflation rose to 3.29% in March, 3.78% in April and 4.17% in May.

Yields rose too, but more slowly: 3.68% on March 31, 3.72% on April 30 and 3.79% on May 29. The gap narrowed to 0.39 point in March, turned to minus 0.06 in April and minus 0.38 in May (all computed).

The turn in June

In June the index fell, to 332.568 from 333.979 in May, a decline of 0.42% (computed), and annual inflation slowed to 3.46%. The one-year yield rose to 3.98% on June 30. The gap became positive again, at 0.52 point. It widened to 0.78 in July (yield 4.08%, inflation 3.30%), 0.81 in August (4.16% and 3.35%) and 0.82 in September (4.54% and 3.72%).

The data show what happened, not why. Over those months the CPI rose 0.07% in July, 0.40% in August and 0.65% in September (computed from index levels of 332.568, 332.813, 334.131 and 336.298), while the one-year yield climbed 0.75 percentage point from the end of May to the end of September (computed). The pattern is one of yields catching up with an earlier jump in prices, but the figures do not establish that the yields responded to inflation.

Across the nine months the picture is less rosy than the last three readings suggest. From January 30 to September 30 the one-year yield rose 1.06 percentage points, to 4.54% from 3.48%, while annual inflation rose 1.33 points, to 3.72% from 2.39% (both computed). The September cushion of 0.82 point is therefore still smaller than the 1.09 points of January. Cash has recovered most of what the spring took away, but not all of it. Readers comparing the figures with their own accounts should substitute the rate they actually receive and their own tax situation for the Treasury yield used here.

What is missing for October

October's gap cannot be calculated on the same basis. The St. Louis Fed's series shows an index of 337.476 for October 2026, 0.35% above September (computed), but no value for October 2025, so the 12-month rate is not available there. The one-year yield was 4.36% on October 30 and 4.56% on November 10, according to the Treasury. With the September inflation rate of 3.72% as a stand-in, the gap would be 0.64 point on October 30 and 0.84 on November 10 (computed); that is an approximation, not a published figure.

Why the comparison matters for household cash

Cash earns different rates in different places. FinanceInTime's earlier analysis found that deposit rates were flat on the year while Treasury yields rose, so the one-year Treasury is a ceiling rather than the rate most savers received. What the Treasury series does show is the return available on a risk-free, one-year loan to the government, set against the pace at which the same year's prices rose. Where an account pays less than that, the real return shrinks by the difference.

Cash has stopped losing ground, for now

Our view is that the real return on short-term cash is the quiet story of 2026: it was comfortably positive in January and February, negative in April and May, and has been roughly 0.8 point positive since July. That recovery came from a pause in monthly price increases in the summer and from yields rising, and only the second is within the central bank's present control.

The opportunity for households is that cash set aside for known expenses is again earning more than prices are rising, at least in the Treasury market. The threat is that October's 0.35% monthly rise, if repeated, would erase the cushion within months. We expect, if the one-year yield stays near 4.5% and annual inflation near 3.7%, that the gap stays positive through the first half of 2027, and we would drop that assumption if monthly price increases return to the 0.87% seen in March. We would watch the inflation rate for October when the series is complete, and the gap between Treasury yields and what deposit accounts pay.

The view in this final section is FinanceInTime's editorial opinion, for information only. It is not investment, tax, legal or other advice, and it does not take your circumstances into account. Forecasts are uncertain and past results do not guarantee future ones.