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Information content of U.S. treasury inflation-indexed bonds

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  • Malek Lashgari

Abstract

U.S. Treasury inflation-indexed bonds are designed to provide a stable real return before taxes. A comparison between these bonds and conventional bonds reveals that the effective real yield of U.S. Treasury inflation-indexed bonds is attractive. The econometric results suggest, however, that the real rate provided by U.S. Treasury inflation-indexed bonds is not independent of inflation, implying that the Fisher hypothesis is contradicted by the data. An implication of negative correlation between the real rate and inflation is that the time to buy U.S. Treasury inflation-indexed bonds is when inflation is low. While the yields on U.S. Treasury inflation-indexed bonds are shown to reflect inflation by a lag of about one month, nominal interest rates do not fully adjust to inflation. Copyright International Atlantic Economic Society 2000

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  • Malek Lashgari, 2000. "Information content of U.S. treasury inflation-indexed bonds," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 6(3), pages 520-530, August.
    • Handle: RePEc:kap:iaecre:v:6:y:2000:i:3:p:520-530:10.1007/bf02294969
    DOI: 10.1007/BF02294969
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