Inflation-indexed bonds: the dog that didn't bark
The introduction by the U.S. Treasury of inflation-indexed notes was one of the most widely publicized innovations in the U.S. capital markets in recent years. Since their introduction in January 1997, $57 billion in 5-, 10-, and 30-year Treasury Inflation-Protected Securities (TIPS) has been issued, and the Treasury has recently announced that TIPS will also be offered as small- denomination savings bonds. Because both the coupon and the principal of TIPS vary with the consumer price index, the Treasury believes these notes will appeal to risk-adverse investors seeking protection from inflation. Proponents of TIPS have argued that their issuance should also reduce the cost of borrowing to the Treasury and permit a clear measure of investors' forecasts of inflation. Despite their promise, it is doubtful whether inflation-indexed bonds have been a great success either in the United States or in other industrialized countries that have issued them. The authors analyze the characteristics of TIPS that might explain their limited acceptance. Their model indicates that TIPS should appeal primarily to risk-investors in high tax brackets who are pessimistic concerning inflation. Despite their unique design, however, TIPS are not unique in offering investors inflation-protected returns.
Volume (Year): (1999)
Issue (Month): Jan ()
|Contact details of provider:|| Postal: 600 Atlantic Avenue, Boston, Massachusetts 02210|
Web page: http://www.bos.frb.org/
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John Y. Campbell & Robert J. Shiller, 1996. "A Scorecard for Indexed Government Data," Harvard Institute of Economic Research Working Papers 1758, Harvard - Institute of Economic Research.
- Fischer, Stanley, 1983. "Indexing and inflation," Journal of Monetary Economics, Elsevier, vol. 12(4), pages 519-541, November.
- John Y. Campbell & Robert J. Shiller, 1996.
"A Scorecard for Indexed Government Debt,"
Cowles Foundation Discussion Papers
1125, Cowles Foundation for Research in Economics, Yale University.
- Baer, Werner & Beckerman, Paul, 1980. "The trouble with index-linking: Reflections on the recent Brazilian Experience," World Development, Elsevier, vol. 8(9), pages 677-703, September.
When requesting a correction, please mention this item's handle: RePEc:fip:fedbne:y:1999:i:jan:p:3-24. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.