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.
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References in periodicals archive ?
R&E has argued that this strengthens the case for immunizing a larger percentage of liabilities with real return bonds. The province of Ontario should find it attractive to issue such bonds.
Patterned on the Canadian government's Real Return Bonds or RRBs [Circular], the new U.S.