Bond, index-linked (inflation-indexed bond; bond bearing interest and paid off in accordance with an index; index-linked bond, de-leveraged bond)

Bonds that pay investors according to a formula that is based on a fraction of the increase or decrease in a specified index. – In Germany, such bonds were prohibited by law until the start of monetary union on January 1, 1999; in the U.S.A., too, they have only been permitted since 1977. – In Germany, the federal government issued a ten-year inflation-linked bond (also known as an inflation bond in the jargon) for the first time in March 2006; the goal is to cover five percent of government debt with such securities. – See bond, commodity-related, break-even inflation rate, issue, indexed, third pillar, haven, safe, index bond, index fund, swap, inflation-indexed, overnight rate swap, interest rate swap. – Cf. Deutsche Bundesbank Monthly Report of July 2001, p. 36; ECB Monthly Report of December 2003, p. 33 ff, ECB Monthly Report of July 2006, pp. 33 ff. (yield estimates for inflation-indexed bonds in relation to other measures), Deutsche Bundesbank Monthly Report of October 2006, pp. 15 ff. (detailed presentation with overviews and references), pp. 40 f. (duration for inflation-indexed government bonds), pp. 41 (yield differential between normal and inflation-linked bonds as a measure of the inflation rate expected by market participants), Deutsche Bundesbank Monthly Report of August 2007, pp. 36 f. (estimation of the zero-coupon interest rate structure; overviews), ECB Monthly Report of November 2008, pp. 40 f. (sharp rise in yields on inflation-indexed U.S. and Japanese bonds in the wake of the subprime crisis; overviews).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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