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Building Daily Real-Rate Proxies from Monthly Inflation Data

Article Quant Q&A · Author: Derkh
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Summary

The document considers how to include daily real interest rates in a high frequency model when a long daily history is difficult to find. It presents two proxy approaches: subtract realized year-over-year inflation from a short-term nominal rate, or use expected inflation alongside the nominal rate. Because inflation observations arrive monthly and with a publication lag, either approach requires interpolation and careful alignment with the information available on each date.

The answers point to public interest-rate and inflation-linked yield series as possible data sources. They caution against treating short-term TIPS real yields as a clean proxy, since linker yields can reflect seasonality, limited liquidity, and other technical influences. The document does not provide a complete daily dataset, specify an interpolation procedure, or assess the proxies quantitatively. Researchers should therefore document their timing assumptions and validate whether the chosen series fits the model’s purpose.

Key ideas

  • A daily real-rate proxy can combine a short-term nominal rate with realized year-over-year inflation.
  • Expected inflation may offer a more timely measure of the inflation component, depending on data availability.
  • Monthly inflation releases require interpolation and attention to publication lags.
  • Short-term TIPS yields may be distorted by liquidity, seasonality, and market-specific technical factors.
  • The document offers candidate data sources but does not compare proxy accuracy.

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Fixed incomeStatisticsUS markets
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# Data for daily real interest rates


# Data for daily real interest rates












In a high frequency model i would like to add daily real interest rates (preferably short-term) as a variable.

However, I cannot seem to find either daily CPI data, or daily real interest rates (which go back to 1998). Is there some kind of daily proxy i could use, or maybe a way to calculate daily real rates with monthly data for CPI?

## Answer by Mike Kipnis (score 1)

https://quant.stackexchange.com/a/41074

That data, at least some of it, should be available at https://fred.stlouisfed.org

Examples: https://fred.stlouisfed.org/series/T10YIE https://fred.stlouisfed.org/series/DFII5

## Answer by Helin (score 0)

https://quant.stackexchange.com/a/41084

You have several options, but most of them involve some form of interpolation.

Option 1 is to use short-term interest rate minus realized year-over-year inflation. Since inflation is published monthly with a one-month lag, you'd need to do some (very harmless) interpolations.

Since interest rate embeds forward expectations, a potentially better option is to use expected inflation (e.g., consensus economic forecasts). Depending on the data source, these could be of slightly higher frequency and are generally more timely. But in the end, some interpolations will still be needed.

The chart below shows two estimates, one using realized inflation and one with expected inflation:

I would NOT recommend using short-term real yield from TIPS, since these linkers are very illiquid and very technical in nature (with their yields reflecting a confluence of seasonality, illiquidity premium, and other idiosyncratic factors). The chart below shows 3-month TIPS yields over time:

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.