Browsing by Author "Klein, Robin Patrick"
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- Which risk-return profiles do traditional bonds offer in comparison to inflation-linked bonds during periods of elevated inflation?Publication . Klein, Robin Patrick; Schliephake, EvaThe preceding years have been characterised by inflationary pressure, thereby emphasizing the importance for investors to understand the dynamics of the different bonds classes within such an environment. This thesis investigates the risk-return profiles of different bonds classes (Treasury inflation protected securities, government-, and corporate bonds) within the recent elevated inflationary period. Using comprehensive bonds data from the period of 2014-2024, this study provides key insides about the impact inflation has on these bonds classes. Additionally, it provides insides about the macroeconomic environment that needs to be evaluated to understand the final impact on the bonds market. My findings reveal that treasury inflation protected securities do not provide superior performance within inflationary periods compared to the other bonds classes. High Yield provides higher risk-rewards as credit quality is negatively correlated with risk-reward. The same is true for short duration. The less duration the less risk-reward is provided, on the Government and the Corporate side. Furthermore, it is evident that central bank actions during the recent inflation period influence the bonds market in a novel manner, as unconventional tools are employed to combat yield curve movements and supply shocks. The thesis concludes that long-duration and lower credit quality offer a more preferable risk-return profile while treasury inflation protected securities limit the downside risk.