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Investors who struggle to see the connection between real yields, as expressed by the US Treasury market, and the unreal valuation of technology stocks with no earnings should read Eric Platt and Colby Smith’s article (Report, April 20).

I would add one rider to the analysis; the valuation of US Treasuries and real yields in particular has been distorted by the Federal Reserve’s quantitative easing policy, and as we return to more realistic valuations, the unwinding of this policy could cause some further distortions.

Real yields on Treasury inflation-protected securities (Tips) getting back to zero is a healthy sign that investors, rather than the Fed, are in charge of the Treasury market. With the 10-year now close to 3 per cent, investors who think the consumer price index will average above 3 per cent over the next 10 years should invest in Tips rather than conventional Treasury bonds.

John Thomson
New York, NY, US

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