Inflation Bond Curve


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Inflation Indexed Bond Curve


FinPricing offers the following curves for various currencies via API:

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  • RFR (risk free rate) curves
  • SOFR, €STR (ESTR, ESTER), SONIA, TONA, CORRA, AONIA, SARON curves
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  • Swap rate curves
  • Basis curves
  • Spot rate or zero rate curves
  • Forward rate curves
  • Discount curves
  • Inflation Swap rate (CPI, RPI, HICP) curves

Inflation indexed bonds, also called inflation linked bonds or real return bonds, are bonds where the principal is indexed to inflation or deflation on a daily basis in terms of a reference index, such as Consumer Price Index (CPI). The primary purpose of these bonds is the transfer of inflation risk.

An inflation indexed bond is designed to hedge the inflation risk of the bond. Inflation bonds are an important vehicle for investors hose liabilities indexed to changes in inflation or wages. They have favorable performance and lower volatility relative to other risk assets. It is favorable to retirement planning and pension funds given its inflation protection. Inflation indexed bonds are less liquid than regular bonds.

Inflation linked bonds are mainly issued by government. There is also a small portion of inflation-linked bonds are issued by commercial financial institutions, that are usually treated as government-issued inflation-linked bonds.

Breakeven inflation rates can be found by comparing the zero-yields on inflation-linked and nominal bonds with the same maturity. However, the breakeven yields found this may be affected by the liquidity premium embedded in the bond.

Inflation linked bond curve is the term structures of the most liquidy inflation bond prices at different maturities. An inflation bond curve same data is shown below:

CurrencyInstrumentDateTenorPriceYield
GBPGB00B85...2020-11-275Y110.58-0.029
GBPGB00B3Y...2020-11-2710Y128.67-0.029
GBPGB00B46...2020-11-2715Y155.79-0.027
GBPGB00B3L...2020-11-2720Y176.48-0.024
GBPGB00BZ1...2020-11-2730Y192.16-0.022
GBPGB00BDX...2020-11-2750Y295.19-0.022

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