Inflation-linked bonds, or ILBs, are securities designed to help protect investors from inflation. Primarily issued by sovereign governments, such as the U.S. and the UK, ILBs are indexed to inflation so that the principal and interest payments rise and fall with the rate of inflation. Inflation can significantly erode investors’ purchasing power, and ILBs can potentially provide protection from inflation’s effects. ILBs may also offer additional benefits in a broader portfolio context.
A famous example of inflation-linked bond in Hong Kong is iBond, which is issued by the Hong Kong government. In the 2022-23 Budget Speech, the Financial Secretary of Hong Kong announced the issuance of iBond valued at no less than $15 billion HKD.