What is the real yield of Euro Inflation Linked Bonds?

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alpine_boglehead
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What is the real yield of Euro Inflation Linked Bonds?

Post by alpine_boglehead »

For US TIPS, the treasury publishes the real yields e.g. on this page. The real yield of 10 year duration as of 9/30/2022 is 1.68%.

Where can you view the real yield of Eurozone inflation linked government bonds? A web search didn't turn out anything really useful.

This recent thread hinted at the product pages of iShares ETFs where also the real yield is specified (these are intermediate term ETFs, 7.9 and 9.4 effective duration).
What's weird here is that both EUR-hedged and non-EUR hedged have the same real yield - that seems to be a mistake (it's the same fund, only with hedged/unhedged share classes), it's also the same for iShares US TIPS ETFs, where the hedged and unhedged versions show the same real yield.

The most reliable number for the real yield is probably on the first one (Euro inflation linked government bonds). However, you have to account for the credit risk of Italy (27% of this ETF), and France (41% of this ETF), whose 10 year nominal bond yields are quite higher than the German ones (German 2.1%, France 2.7%, Italy 4.5%), reflecting lower credit quality.

So the actual "treasury" real yield (i.e. the one you would get for really safe, i.e. German inflation-linked bonds - and also EUR hedged US TIPS) would be quite lower than the 0.5%, I'd estimate 1% lower based on the abovementioned differences in yield between Germany and other Euro countries, giving us -0.5%. Does this sound about right?

Are there any official places (like the US treasury) that publish the real yield curve on Eurozone government bonds? (ideally for the individual countries' bonds).
Valuethinker
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Re: What is the real yield of Euro Inflation Linked Bonds?

Post by Valuethinker »

alpine_boglehead wrote: Sun Oct 02, 2022 12:19 am For US TIPS, the treasury publishes the real yields e.g. on this page. The real yield of 10 year duration as of 9/30/2022 is 1.68%.

Where can you view the real yield of Eurozone inflation linked government bonds? A web search didn't turn out anything really useful.

This recent thread hinted at the product pages of iShares ETFs where also the real yield is specified (these are intermediate term ETFs, 7.9 and 9.4 effective duration).
What's weird here is that both EUR-hedged and non-EUR hedged have the same real yield - that seems to be a mistake (it's the same fund, only with hedged/unhedged share classes), it's also the same for iShares US TIPS ETFs, where the hedged and unhedged versions show the same real yield.

The most reliable number for the real yield is probably on the first one (Euro inflation linked government bonds). However, you have to account for the credit risk of Italy (27% of this ETF), and France (41% of this ETF), whose 10 year nominal bond yields are quite higher than the German ones (German 2.1%, France 2.7%, Italy 4.5%), reflecting lower credit quality.

So the actual "treasury" real yield (i.e. the one you would get for really safe, i.e. German inflation-linked bonds - and also EUR hedged US TIPS) would be quite lower than the 0.5%, I'd estimate 1% lower based on the abovementioned differences in yield between Germany and other Euro countries, giving us -0.5%. Does this sound about right?

Are there any official places (like the US treasury) that publish the real yield curve on Eurozone government bonds? (ideally for the individual countries' bonds).
Financial Times (printed) has some spot rates for Real Return Bonds.

Bloomberg of course has the curves. If you google around you might find someone has posted it? (eg twitter)
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alpine_boglehead
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Re: What is the real yield of Euro Inflation Linked Bonds?

Post by alpine_boglehead »

Valuethinker wrote: Sun Oct 02, 2022 12:54 pm
Financial Times (printed) has some spot rates for Real Return Bonds.

Bloomberg of course has the curves. If you google around you might find someone has posted it? (eg twitter)
Ok thanks very much, restricting to specific resources while googling yields better results. What I've found is in line with the 0.5% real yield on Eurozone bonds from the iShares page.
Laurizas
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Re: What is the real yield of Euro Inflation Linked Bonds?

Post by Laurizas »

alpine_boglehead wrote: Mon Oct 03, 2022 12:41 am What I've found is...
Could you share?
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Re: What is the real yield of Euro Inflation Linked Bonds?

Post by alpine_boglehead »

Laurizas wrote: Mon Oct 03, 2022 3:12 am
alpine_boglehead wrote: Mon Oct 03, 2022 12:41 am What I've found is...
Could you share?
I've found this twitter thread. Eurozone real yields seem to be above zero now for the first time in 8 years.
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Re: What is the real yield of Euro Inflation Linked Bonds?

Post by Stork »

alpine_boglehead wrote: Sun Oct 02, 2022 12:19 am ...

What's weird here is that both EUR-hedged and non-EUR hedged have the same real yield - that seems to be a mistake (it's the same fund, only with hedged/unhedged share classes), it's also the same for iShares US TIPS ETFs, where the hedged and unhedged versions show the same real yield.

...
This seem to be standard, you always see the unhedged yields. For fixed rate bonds you should be able to estimate the hedged yield by looking at the difference in interest between the two currencies; I have no idea what applies to inflation protected bonds.
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Re: What is the real yield of Euro Inflation Linked Bonds?

Post by squirrel1963 »

I've also had similar problems in finding the real yield curve for EU treasuries.
What I've seen in the past few months is that, as expected, Italian inflation-linked treasuries have a higher yield than France and Spain treasuries, which in turn have a somewhat higher yield than Germany's bund-€-I.

This a link I've found on France OAT-€I :

https://www.aft.gouv.fr/en/oatis-key-figures

2028 OAT-i yield is 0%
2036 OAT-I yield is 0.5%
Implied BEI for both seems to be 2.5%

Here you can find current quotes for BTP-ITALIA and BTP-E-I, but unfortunately it doesn't even report the yield:

https://www.soldionline.it/quotazioni/o ... dicizzati/

Using current quote and YTM calculator, I see real yield for 2028 to be 2.0%. Italy is currently in the midst of forming a new government, and its spread is quite a bit higher than for instance 6 months ago.

If someone can find better source of info -- ideally a yield curve, I'd appreciate it too :-)

Edit : current yield spreads in reference to the German nominal bünd are:
France : 2.86%
Italy : 4.66%
So italy's spread compared to France is about 1.8%.
Source for spread info: https://www.spreadoggi.it/
LMP | Liability Matching Portfolio | safe portfolio: TIPS ladder + I-bonds + Treasuries | risky portfolio: US stocks / US REIT / International stocks
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