Hedging Against Inflation: International Evidence on Investor Clientele Effects

Martijn Boermans and Laurens Swinkels

Working Papers from Czech National Bank, Research and Statistics Department

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 study investor demand for inflation-linked bonds using detailed bond portfolio data. Our analysis reveals pronounced market segmentation: insurance companies, with predominantly nominal liabilities, underinvest in inflation-linked securities, while pension funds overinvest. Investors hedging inflation risk exhibit a strong preference for bonds indexed to domestic rather than foreign inflation. A regulatory reform announcement provides quasi-experimental evidence that the demand for inflation-linked bonds may be shaped by regulatory requirements.

Keywords: Inflation-linked bonds; investor clientele; securities holdings; sovereign bonds; TIPS (search for similar items in EconPapers)
JEL-codes: F21 G11 G15 G22 G23 (search for similar items in EconPapers)
Date: 2026-04
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