Major Inflation-Linked Bond Markets by Estimated Market Value ($bn) as at 31 December, 2009
$bn
US 550
UK 300
Turkey 240 GDP $735 billion (2010 estimate)
Chile 210 GDP $243 billion (2011 estimate)
France 200 GDP $2808 billion (2011 estimate)
Mexico 200
Poland 200
Colombia 160
South Korea 160
Brazil 150 GDP $2090 billion (2011 estimate)
Italy 130
Japan 70
Germany 40
Canada 40
Sweden 30
Global estimated index-linked bond market: 2 680 $bn
Standard Life Investements, An Investor´s Guide to Inflation-Linked Bonds,
Chile, with less than one tenth of France´s GDP, has a bigger government inflation-indexed bond market. Chile´s 44-year history of inflation-indexing monetary items in terms of the Unidad de Fomento, which is a monetized daily indexed unit of account, most probably had a strong influence on this state of affairs. Chile was not plagued by hyperinflation and did not have to resort to Dollarization during that period while some of their regional neighbours had to.
Both Turkey´s and Brazil´s relatively big sovereign inflation-indexed bond markets may be a result of their recent experiences with hyperinflation. Brazil did not inflation-index a significant portion of their broad money supply - like Chile currently does – during their 30 years of very high and high inflation from 1964 to 1994, but, they measured most non-monetary items in their non-monetary or real economy daily in terms of a daily government supplied non-monetary index.
Both Brazil and Turkey have first-hand experience of how rapidly hyperinflation can destroy the purchasing power of money and other monetary items.
Nicolaas Smith Copyright (c) 2005-2011 Nicolaas J Smith. All rights reserved. No reproduction without permission.
