Journal Article

Do Adjustment Lags Matter for Inflation-Indexed Bonds?

Abstract: Some governments sell bonds that protect against variation in inflation. Payments of these bonds are adjusted in response to official inflation measurements with a lag. Considering the effects of such lags could matter both for understanding market-based measures of inflation compensation and for governments deciding what type of inflation-indexed securities to issue. Analyzing pairs of U.K. bonds with almost identical maturities but different lags in inflation adjustment suggests that the lag length matters mainly close to maturity, when seasonality in the underlying price index plays a role.

Bibliographic Information

Provider: Federal Reserve Bank of San Francisco

Part of Series: FRBSF Economic Letter

Publication Date: 2018

Order Number: 08