Real Return Bond

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Real Return Bond

A bond issued by the Bank of Canada that protects the bondholder from inflation. Most fixed dollar obligations pay a fixed coupon rate periodically and mature at par. While this carries low risk, it exposes investors to the possibility that the inflation rate will outpace the interest rate represented on the coupon. In order to protect against this, a Real Return Bond automatically changes its coupon rate according to the inflation rate as tracked by the Canada All-Items Consumer Price Index. Because Real Return Bonds are so safe, they offer very low rates of return.
References in periodicals archive ?
49 rate used in Public Accounts (percent) Real return bond yield 3.
Fixed income securities may include real return bonds, which provide an inflation-adjusted yield by adjusting the principal (face value) amount to reflect changes in the rate of inflation during the life of the bond.
6 per cent in the quarter and DEX Real Return Bonds are down 11 per cent year-to-date, noted MacDonald.
The Fund will hold primarily Canadian real return bonds but may also invest in real return bonds of foreign governments (up to foreign content limit) as well as Canadian and U.