Municipal Inflation-Linked Securities

Municipal Inflation-Linked Securities

Investment vehicles issued by various levels of governments containing variable coupon payments that increase and decrease with changes in the consumer price index (CPI).

Notes:

This type of debt security is similar to regular municipal bonds, but municipal inflation-linked securities offer investors a slightly lower coupon rate because these securities are safer than debt instruments that expose the holder to inflation risk. Also, because these securities carry reduced inflation risk, they don't - like other debt securities - have the potential to increase in price should the rate of inflation subside.

See also: Consumer Price Index - CPI, Coupon, Inflation-Indexed Security, Inflationary Psychology, Inflation-Protected Security, Inflationary Risk, TIPS