CNB seminar "Hedging Against Inflation: International Evidence on Investor Clientele Effects in the Bond Market"
Prague, 28 May 2025
Martijn Boermans (De Nederlandsche Bank)
Martijn Boermans is Research Economist at De Nederlansche Bank and his research is primarily focused on sustainable finance, monetary policy and central banking, and international trade and development.
Hedging Against Inflation: International Evidence on Investor Clientele Effects in the Bond Market
Martijn Boermans and Laurens Swinkels
Abstract: Governments across the world have issued inflation-linked debt to finance their deficits. Recent advances in asset pricing models recognize that there may be clientele effects that affect relative prices, especially in bond markets. We analyze which types of investors choose to hedge against inflation risk by investing in inflation-linked bonds. Our findings reveal that there is clear market segmentation: insurance companies, which have mainly nominal liabilities, invest significantly less in inflation-linked bonds while pension funds overallocate investment towards inflation-linked bonds compared to other investors. Investors who hedge against inflation have a strong preference for bonds linked to local inflation instead of foreign inflation.