More RRBs, Please! Why Ottawa Should Issue More Inflation-Indexed Bonds
AbstractFinancial instruments indexed to the general price level are of great potential use to borrowers and lenders alike. But up until recently, they have been relatively scarce – in part because private borrowers dislike offering protection against inflation that they do not control. Since the early 1980s, several developed-country governments have begun issuing price-level-linked bonds, and these bonds now constitute a large share of some countries’ total debt issue. This study argues that Canada’s federal government, which began issuing real-return bonds (RRBs) in 1991, should issue more RRBs of more types than it currently plans to do. Issuing more RRBs would not only better satisfy existing demand from investors, it has the potential to spur the development of other price-indexed instruments. Experience elsewhere suggests that more federal RRBs could encourage other entities to issue price-indexed debt, and would let intermediaries provide such products as inflation-linked annuities, thus providing more Canadian savers with protection against intentional or accidental inflation.
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Bibliographic InfoArticle provided by C.D. Howe Institute in its journal C.D. Howe Institute Commentary.
Volume (Year): (2012)
Issue (Month): 363 (September)
Financial Services; Monetary Policy; Canada; real-return bonds (RRBs); Bank of Canada;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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