Sentences with phrase «buying nominal bonds»
Theoretically the investor owning TIPS earn 1 % per year less than would have been obtained from buying nominal bonds.
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nominal zero coupon bonds trade below par because we expect money to buy less in the future than we do today.
Now, we knew from the beginning that the Federal Reserve would buy the grand majority (94 %) of its nominal bonds 10 - years and shorter.
The issue price at which investors buy the bonds when they are first issued will typically be approximately equal to the nominal amount.
If you believe inflation is going to be greater than 2.12 % over the next 10 years you would want to buy TIPS instead of nominal bonds.
1) Investor inflation expectations have overshot, and it is time to sell long TIPS and buy long nominal bonds, as long - term inflation expectations may fall in the future.