I am trying to decompose the change in value of an inflation-linked bond into two constituent parts:

1) That due to changing nominal rates on the issuer's non-linked bonds 2) That due to changing inflation

I'm not sure how to go about this, but do have access to a Bloomberg terminal to obtain any necessary data.


1 Answer 1


The change in value of an inflation linked bond is

Change in Real Yield * Duration

= (Change in nominal yield of non-linked bonds - Change in inflation expectations) * Duration

Duration is approximately constant for daily or weekly moves, although it will change if real rates move, so the above is an approximation.


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