What are Capital Indexed Bonds?
Capital Indexed Bonds (CIBs) are a type of bond whose capital value and interest repayments are adjusted periodically for movements in the Consumer Price Index (CPI). Interest is usually paid at a fixed rate on the adjusted face value. At maturity, investors receive the adjusted face value of the bond plus the final coupon based on the adjusted face value.
- Inflation Risk – Protection against inflation
- Income stream – Stream of regular coupon payments and the return of the principal on maturity.
- Inflation Risk – If inflation is negative, the value of the bond will be lower than what it was purchased for.