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I have the nominal spot rates. Based on the Fisher equation , how to get the real interest rate ($r$) and the "expected inflation" ($\pi$) ?

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There is a market for inflation linked government bonds (some countries e.g. US,CA,UK,FR,Germany,...). There are various prices quoted. The price with inflation lift (the inflation that has accumulated since the inception of the bond) and the price without the lift reflecting future nominal interest and inflation. You can calculate the real yield to maturity of inflation linked bonds (using the price without the lift) you get a coupon/yield curve. If you bootstrap this curve then you get a real zero curve. You can subtract nominal rates to get some kind of implied inflation expectation.

But note that for example Germany and France issue bonds linked to EMU inflation and I would be surprised if you get the same expected inflation for both bond markets (although they are linked to one and the same).

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  • $\begingroup$ Thank you very much. May you link the web page where I could find the two prices for a Euro Bond? $\endgroup$ – sparkle Dec 13 '15 at 16:20
  • $\begingroup$ I get an import from Bloomberg. If you start typing "inflation linked" you get auto-completion for linked bonds .. maybe ilb or something similar give you the overview of inflation linked bonds ... wb is the command for world bond markets. $\endgroup$ – Richard Dec 13 '15 at 16:38

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