How does inflation-adjusted bond duration compare to fixed-rate bond duration?
I have thought that inflation-adjusted bond duration would be lower than fixed-rate bond duration since the increase/decrease interest-rates would have smaller impact on inflation-adjusted bond value than on fixed-rate bond value.
However, the guideline answer to Mark Meldrum’s Mock #4 (AM session) question 3G, says that inflation-adjusted bond duration is more than fixed-coupon bond duration.
Stumbled on this too and don’t really understand the answer either. I thought moving into inflation-adjusted bonds from fixed-rate bonds decrease duration?