Capital Indexed Bonds, also referred to as inflation-linked bonds, are a type of fixed income security that offers protection against inflation. These bonds have a base payment that is tied to the Consumer Price Index (CPI), which measures changes in the prices of goods and services. This means that as inflation rises, the base payment on these bonds increases, providing a hedge against rising prices. The principal value of these bonds is also adjusted for inflation through indexation, resulting in a higher maturity amount. This feature makes Capital Indexed Bonds a valuable tool for investors looking to safeguard their purchasing power against the effects of inflation.
