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Inflation-linked Bonds: An Introduction

Author

Listed:
  • Maria Farrugia

    (Central Bank of Malta)

  • Glenn Formosa

    (Central Bank of Malta)

  • Joseph Julian Pace

    (Central Bank of Malta)

Abstract

This paper gives an overview of inflation-linked bonds (ILBs). In the first part, it describes the characteristics of inflation-linked bonds and their pricing mechanics. This is followed by an illustrative example which compares the cashflow structure of the two types of fixed income securities. An analysis of the historical performance of inflation-linked bonds relative to their nominal counterparts1 follows on the basis of the Bloomberg Barclays total return indices for the US and Germany. Correlations between ILBs and fixed coupon bonds were computed.

Suggested Citation

  • Maria Farrugia & Glenn Formosa & Joseph Julian Pace, 2018. "Inflation-linked Bonds: An Introduction," CBM Working Papers WP/05/2018, Central Bank of Malta.
    • Handle: RePEc:mlt:wpaper:0518
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    File URL: https://www.centralbankmalta.org/file.aspx?f=71998
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    References listed on IDEAS

    as
    1. Jeffrey M. Wrase, 1997. "Inflation-indexed bonds: how do they work?," Business Review, Federal Reserve Bank of Philadelphia, issue Jul, pages 3-16.
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    More about this item

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G1 - Financial Economics - - General Financial Markets

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