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Inflation-indexed bonds: a primer for finance officers.

Government Finance Review

| February 01, 2003 | Stumpp, Margaret; Tipp, Robert | COPYRIGHT 2003 Government Finance Officers Association. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan.  All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)Copyright

The hedging and diversification features of inflation-indexed bonds makes this relatively new investment instrument worth considering for public investors.

Inflation remains one of the greatest obstacles to achieving investment goals, despite its dormancy in recent years. Inflation robs fixed interest payments of purchasing power, thereby leading to a decline in the market value of bond portfolios. Inflation also increases the cost of many future liabilities, such as pension benefit payments. Simply put, inflation simultaneously erodes asset values and increases liabilities.

Until recently, only equities and real estate were considered capable of ...

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Source: HighBeam Research, Inflation-indexed bonds: a primer for finance officers.

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