QUICK DEFINITION
Inflation-Linked Bond is a bond whose principal, coupon or both are adjusted according to an inflation index.
WHY IT MATTERS
Why Inflation-Linked Bond matters in bond markets
Inflation-linked bonds allow investors to separate real yields from compensation associated with expected inflation.
MARKET CONTEXT
How to think about it
Bond investors use inflation-linked bond as part of a wider framework that links prices, yields, cash flows, liquidity and risk. The concept should therefore be read together with its related terms rather than as an isolated definition.
Is Inflation-Linked Bond important for fixed-income investors?
← Back to the Bond Market Glossary Yes. Inflation-linked bonds allow investors to separate real yields from compensation associated with expected inflation.