Treasury Indexed Bonds

Redwing · 18th Mar, 2022

Treasury Indexed Bonds are medium to long-term securities for which the capital value of the security is adjusted for movements in the Consumer Price Index (CPI). Interest is paid quarterly, at a fixed rate, on the adjusted capital value. At maturity, investors receive the adjusted capital value of the security – the value adjusted for movement in the CPI over the life of the bond.
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There is an active secondary market for Treasury Indexed Bonds. These institutions (listed alphabetically) have indicated that they make markets in Treasury Indexed Bonds. The level of activity can vary between institutions.
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High demand for Australian government bonds with inflation protection

The Australian Office of Financial Management (AOFM), the federal government’s financing arm, sold $3.25 billion of 10-year inflation-linked bonds on Tuesday in a heavily oversubscribed auction underscoring the appeal of inflation protection in a world reliant on record monetary stimulus.

Attracting more than 30 investors, it represented the largest inflation-linked bond in almost three years, according to one of the three joint lead institutions that syndicated the offer.

Defined benefit and defined contribution superannuation funds, insurance companies and other investors with long-term liabilities buy inflation-linked bonds (ILBs) to hedge against inflation increases and falls.

These securities had fallen out of favour because inflation was viewed as a very low probability risk. But the implementation of extreme government fiscal stimulus across the globe due to the COVID-19 pandemic is bringing inflation back on the radar.
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Treasury Indexed Bonds

Redwing Well-Known Member

Attached Files:

Article04-1.pdf

Log in or Sign up

Treasury Indexed Bonds

Redwing Well-Known Member

Attached Files:

Article04-1.pdf

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