I'm trying to find a formula to calculate the YTM of inflation-linked bonds. I've tried using the conventional YTM formula for bonds and then just adjusting the coupon to the inflation adjusted coupon, but this doesn't seem to be giving an accurate result.

Could someone point me in the correct direction?


1 Answer 1


If it is the real-yield - which is the nominal yield minus inflation - that you are after then you just use the real coupon and price to calculate the yield the same way you would have done with the nominal coupon and price on a nominal bond as it says in the wikipedia: "in the case of inflation-indexed bonds such as TIPS, the bond yield is specified as a rate in excess of inflation, so the real yield can be easily calculated using a standard bond calculation formula".

However, if it is the projected nominal yield you are looking for, I guess you could add inflation quotes from inflation swaps to get some sort of market implicit nominal yield. Then again, for this you should just look at the ordinary nominal market.


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