The capital-protection capacity of emerging-markets inflation-linked bonds

Marielle De Jong, Laurens Swinkels

Research output: Contribution to journalArticleAcademicpeer-review

2 Citations (Scopus)
31 Downloads (Pure)

Abstract

The authors investigate the capital-protection property of inflation-linked bonds in an international context during the period 2012 to 2022. Inflation-linked bonds compensate domestic investors for loss of local purchasing power. Whether the bonds protect foreign investors effectively depends on the inflation levels they endure and on the currency hedging costs. The authors study the case of an American investor who considers allocating inflation-linked bonds to emerging markets rather than to US bonds in view of reaping higher inflation compensation. Their results suggest that during the past decade such allocation would have been worthwhile, even when taking latent risks, notably country default, into account.

Original languageEnglish
Pages (from-to)127-138
Number of pages12
JournalJournal of Portfolio Management
Volume48
Issue number8
DOIs
Publication statusPublished - 2022

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© 2022 by the Author(s).

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