i may just be queryin on something too basic. Real Return + inflation = nominal return. but real bonds are those which include inflation and nominal bonds are those which does not include inflation. can someone pls clarify on this contradiction. thanks.
Aren’t nominal bonds inflation protected. eg TIPS?
but real bonds are those which include inflation and nominal bonds are those which does not include inflation. It is other way around. Real bonds do not have inflation and Nominals do.
cfabosotn, tnaks for your comments. if you refer schweser ss 7, they call real bonds as one which incorporates inflation, and nominal as those which does not consider inflation
Real return bonds (Inflation-indexed bonds) are indexed to inflation. Their coupon payment for each period goes up and down with the period’s inflation level. So the holder is protected from inflation and guaranteed a “real” return, such as TIPS. A nominal bond’s coupon usually will be a certain nominal rate. So there is no inflation protection. Majority of bonds are like that.