In Hot Tip: Nominal Exchange rates and Inflation Indexed Bond
Yields (NBER Working Paper No.
Second, we assume the government can issue an indexed bond
that promises a next-period payment that is a function of next-period income.
An increase in the spread between the nonindexed bond and the indexed bond
indicates an increased expectation of more inflation and vice versa.
New South Wales Treasury Corp, the funding arm of Australia's New South Wales State government, has said that it has appointed Merrill Lynch (NYSE: MER) (OOTC: MERIZ), a part of Bank of America Corporation (NYSE: BAC), to its capital indexed bond
The traditional approaches of fixed income or indexed bond
oriented strategies have limitations which we do not want to accept," it said.
This is despite the Government's relatively successful US-dollar indexed bond
offered last week.
American Century Inflation Adjusted Treasury (ACTIX), GMO Inflation Indexed Bond
(GMIIX), and 59 Wall Street Inflation-Indexed Securities (FNISX).
Finally, the article shows that historically the market risk of an indexed bond
has been small compared to that of a conventional bond with with similar maturity.
Thus, an indexed bond
purchased at time t pays one unit of the endowment good with certainty at time t + 1.
This indexed bond
contributes to making our portfolio far more diverse.