TY - JOUR T1 - Incorporating Linkers in a Global Government Bond<br/>Risk Model JF - The Journal of Portfolio Management SP - 92 LP - 99 DO - 10.3905/jpm.2013.39.2.092 VL - 39 IS - 2 AU - Marielle de Jong Y1 - 2013/01/31 UR - https://pm-research.com/content/39/2/92.abstract N2 - Many governments around the world now issue inflation-protected securities, or linkers, alongside conventional nominal bonds. This extends the fixed-income investment universe. Investors may not know how to build these new securities into a bond-risk model that captures overall global-price covariance. The author studies this question through the international capital asset pricing model approach, which decomposes risk into a global systematic component and a local specific component. The challenge is to fit a linear factor model onto the triangular relationship that exists between the nominal bond yields, the inflation-linked bond yields, and yield spreads called the inflation break-even rates. The author’s model provides a consistent view of risk for internationally invested portfolios containing nominal bonds, linkers, and/or inflation swaps.TOPICS: Fixed-income portfolio management, technical analysis, global ER -