Inflation-Indexed Bonds MacroMonitor Marketing Report Vol. II, No. 15 February 1997

Potential Market for Inflation-Indexed Bonds

With the introduction of inflation indexed bonds, the Treasury Department has unleashed a new investment product on investors. Although initially, professional money managers are the likely purchasers, the $1000 minimum suggests that individual consumers are also potential purchasers. To determine who these likely buyers are, CFD combined respondents who agreed with the statement "I would pay a one-time 5% fee for an investment guaranteed to grow 3% faster than inflation" with those households that already own at least $1000 in Treasury bonds, municipal bonds, or U.S. savings bonds.
  • More than 10 million households—the vast majority of which are U.S. savings bond owners—fall into the target population for an inflation-indexed bond.
  • Significant demographic differences—including age, income, retirement, presence of children, assets, and net worth—exist among subsegments of the target population.
  • Other important differences exist among these groups with regard to their use of financial advisors and the types of advice in which they are interested.
  • Risk-return trade-offs, importance of various investment factors, and other financial attitudinal differences strongly suggest that very different marketing approaches for inflation-indexed bonds will be effective with each of these target segments.