Principal indexation
The mechanics of an inflation-linked bond: the principal is restated in line with the consumer price index, and the coupon is calculated on the already indexed amount.
How to read the number
Protection is built into the body of the debt rather than into the rate: the base grows, and the cash coupon grows with it.
When the metric lies
Indexation runs with a lag of several months and follows the official index, not a personal basket of expenses. When prices jump, the bond catches up only later.
Also known as: indexed principal, index-linked principal