3
$\begingroup$

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.

$\endgroup$
1
$\begingroup$

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.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.