September 26, 2022

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How are inflation-linked bonds different from standard bonds?

How are inflation-linked bonds different from standard bonds?

  • Although the exact level of inflation cannot be predicted, inflation-linked bonds are one of the safest ways to store savings and protect capital from a decline in the purchasing power of money.
  • As an investment, they are useful only when inflation is rising, but not hyperinflation. If not, the profit will be much less than in the case of fixed-rate bonds
  • Bonds of this type also have a longer freezing time than in the case of variable rate variants with a fixed interest rate of 3 months (equal interest) or 2 years.

Inflation-related bonds They are issued serially, mainly from the state treasury. Moreover, by private companies and financial institutions, this alternative is less common. It should be noted that the available versions include 4 and 10 year versions and those intended for those who use the 500+ program, i.e. 6 and 12 year versions. Will this alternative to debt securities always provide the savings from inflation?

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