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Hedging Against Inflation: International Evidence on Investor Clientele Effects

Author

Listed:
  • Martijn Boermans
  • Laurens Swinkels

Abstract

Governments across the world have issued inflation-linked debt to finance their deficits. Recent advances in asset pricing models recognize that there may be clientele effects that affect relative prices, especially in bond markets. We study investor demand for inflation-linked bonds using detailed bond portfolio data. Our analysis reveals pronounced market segmentation: insurance companies, with predominantly nominal liabilities, underinvest in inflation-linked securities, while pension funds overinvest. Investors hedging inflation risk exhibit a strong preference for bonds indexed to domestic rather than foreign inflation. A regulatory reform announcement provides quasi-experimental evidence that the demand for inflation-linked bonds may be shaped by regulatory requirements.

Suggested Citation

  • Martijn Boermans & Laurens Swinkels, 2026. "Hedging Against Inflation: International Evidence on Investor Clientele Effects," Working Papers 2026/08, Czech National Bank, Research and Statistics Department.
    • Handle: RePEc:cnb:wpaper:2026/08
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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