Hi, I don't really understand wording & computation in the global macro strategy example (page 75 from study notes). It's written : long position : FNIPS provides real yield short position FNB provides nominal yield (i though it was just the coupon, but in the core reading from stowell, we can read that "ENB is a nominal note so its yield is nominal yield = real yield + expected inflation" (error in the book?)) Then calculation of gain/losses FNIPS using Real yield + inflation (i thought it was "real yield" only). and for FNB, you use just coupon. Maybe i just need better definitions for real yield and nominal yield... For me : real yield = nominal + inflation (or - deflation) and nominal = return from investment (coupon) Thanks a lot, Leli
FNIPS is an Inflation protected security, so you will get real yield + inflation return as well (which makes you protected) With normal (or nominal) fixed-income investments, investors will bear inflation risk (returns could be eroded by inflation)...which is our FNB Bond in this case which pays nominal return I hope i have it right Ankur
