26/06/2012
By Ilonka Oudenampsen
The issuance of inflation-linked corporate bonds may provide a solution for both institutional investors and corporations, according to new research by EDHEC-Risk Institute.
Entitled Optimal Design of Corporate Market Debt Programmes in the Presence of Interest-Rate and Inflation Risks, the research found that the topic is perceived as highly relevant to current investor concerns and issuers of corporate debt.
For investors, inflation-linked corporate debt could be an ideal instrument for hedging their liabilities at a time when sovereign debt is no longer considered the default asset for pension funds’ asset-liability management. For corporations it would ultimately limit their risk and increase the value of its shares.
The institute said that potential issuers agreed with the positive attributes of inflation-linked debt, while over half of respondents recognised the prospects for the development of a highly liquid market as a result of this type of research. The paper found strong agreement among respondents that for many firms, current debt management practices can be improved through the issuance of inflation-linked debt.
