Inflation-Indexed Security


DEFINITION of 'Inflation-Indexed Security'

A security that guarantees a return higher than the rate of inflation if it is held to maturity. Inflation-indexed securities link their capital appreciation, or coupon payments, to inflation rates. Investors seeking safe returns with little to no risk will often hold inflation-indexed securities.

Also known as a "real return" securities.

BREAKING DOWN 'Inflation-Indexed Security'

In other words, an inflation-indexed security guarantees a real return. These real return securities usually come in the form of a bond or note, but may also come in other forms. Since these types of securities offer investors a very high level of safety, the coupons attached to such securities are typically lower than notes with a higher level of risk. There is always a risk-reward tradeoff for investors to balance.

  1. Inflation

    The rate at which the general level of prices for goods and services ...
  2. Consumer Price Index - CPI

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  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise ...
  4. Federal Reserve Board - FRB

    The governing body of the Federal Reserve System. The seven members ...
  5. Stagflation

    A condition of slow economic growth and relatively high unemployment ...
  6. Inflationary Psychology

    A state of mind that leads consumers to spend more quickly in ...
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