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Inflation-indexed bonds: how do they work?

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  • Jeffrey M. Wrase

Abstract

In January 1997, the United States Treasury, after years of debate, issued its first inflation-indexed bonds. These securities differ from conventional bonds in that principal and interest payments are linked to a price index. Thus, the purchasing power of an investor's savings is protected from inflation. This article provides a simple description of the Treasury's new offering and discusses why indexed bonds may be useful to investors, the Treasury, and policymakers

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Bibliographic Info

Article provided by Federal Reserve Bank of Philadelphia in its journal Business Review.

Volume (Year): (1997)
Issue (Month): Jul ()
Pages: 3-16

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Handle: RePEc:fip:fedpbr:y:1997:i:jul:p:3-16

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Related research

Keywords: Inflation-indexed bonds ; Government securities ; Indexation (Economics);

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Cited by:
  1. Lioui, Abraham & Poncet, Patrice, 2005. "General equilibrium pricing of CPI derivatives," Journal of Banking & Finance, Elsevier, vol. 29(5), pages 1265-1294, May.
  2. Madureira, Leonardo, 2007. "The ex ante real rate and inflation premium under a habit consumption model," Journal of Empirical Finance, Elsevier, vol. 14(3), pages 355-382, June.
  3. Schulz, Rainer, 2000. "Hedging the standard of living via cost of living index futures," SFB 373 Discussion Papers 2000,93, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  4. Ricardo Selves & Marcin Stamirowski, 2011. "Including linkers in a sovereign bond portfolio: an HJM approach," BIS Papers chapters, in: Bank for International Settlements (ed.), Portfolio and risk management for central banks and sovereign wealth funds, volume 58, pages 111-137 Bank for International Settlements.
  5. Thorsten Lehnert & Aleksandar Andonov & Florian Bardong, 2009. "TIPS, Inflation Expectations and the Financial Crisis," LSF Research Working Paper Series 09-09, Luxembourg School of Finance, University of Luxembourg.
  6. Juan Angel Garcia & Adrian van Rixtel, 2007. "Inflation-linked bonds from a Central Bank perspective," Occasional Paper Series 62, European Central Bank.
  7. Simón Sosvilla-Rivero & Emma García, . "Forecasting the Dollar/Euro Exchange Rate: Can International Parities Help?," Working Papers 2003-15, FEDEA.

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