Inflation-Linked Bonds Leave a Bitter Taste for Public Investors
The U.S. inflation-linked bond sector has experienced major outflows since the start of 2013. Treasury Inflation Protected Securities also called Tips performed well in recent years. With regard to Tips, there is concern that real yields can increase along with nominal bond yields without inflation growing. The theory behind inflation-linked bonds is to allow investors the chance to hedge risk on negative yields on government bond portfolios. In the 1950s, many emerging market economies issued inflation-linked bonds.
In 2012, Norway’s Government Pension Fund Global (GPFG) sliced inflation-linked bond holdings by 73% – reduced to 42.2 billion NOK. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
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