Explain Capital Indexed Bonds.

Capital Indexed Bonds Capital indexed bonds are inflation-protection securities. Such bonds, therefore, provide good hedge against inflation risk. The benefits do extend beyond hedging. Capital index bonds can be used as a market indicator for inflation expectation. This will help investors take a more intelligent decision on their current consumption. Finally, the spot yield curve can be better constructed based on the real yields. A capital indexed bonds lowers the interest rate risk by neutralizing the inflation risk.