Inflation-Indexed Bond Law and Legal Definition

Inflation-indexed bond is a bond or other fixed-rate security with an interest rate that varies according to inflation. They are designed to cut out the inflation risk of an investment. If an inflation-indexed bond is held to maturity, then the investor guarantees that the return will exceed the rate of inflation.

The following is an example of a case law referring to inflation indexed bond:

“Inflation indexed bonds are issued by the U.S. Government, and by their very design provide for an inflation-indexed real rate of return which directly equates to a below-market discount rate.” [Theodile v. Delmar Sys., 2007 U.S. Dist. LEXIS 64729 (W.D. La. Aug. 31, 2007)].