Inflation Linked Bonds (ILBs), also known as TIPS, real return bonds, treasury gilts, treasury stocks, and generic inflation indexed bonds and linkers, are debt instruments whose principal and subsequent interest payments are adjusted based on the rise of inflation.

ILBs follow a trailing three month index. They are adjusted based on changes in the CPI-U (consumer price index for all urban consumers) with a three month lag. The actual index used in all calculations is published three months prior, and is referred to as the CPI (consumer price index).

To set up an ILB security, you must first add the CPI index security. That is, the underlying index security used to measure the inflation component of the security. After adding the underlying index, add the security master record for the ILB using the Add Long Term Debt panel. The underlying index is stored with the Underlying Information group of fields on the Add Long Term Debt panel. Every ILB security has a Dated Date CPI. This is the initial value against which all future index calculations are made and it remains constant throughout the life of the security. The system supports different inflationary income calculation methods of ILBs. The ILB Calculation Type identifies which calculation method to use when calculating the Daily CPI and Daily ILB index ratio. You must add the monthly CPI index rates in the Variable Rate table to correctly calculate ILB index ratios as of the settlement date of each transaction. The system requires enough future data to calculate the daily ILB index ratio for each day's earnings. In the case of as of transactions, the system automatically runs earnings up to the post date of the trade. Therefore, you must have CPI index rates in the Variable Rate table to prevent the failure of earnings.

Add CPI Index Securities

Content on this page:

To set up an ILB security master file record, you must first add the underlying index security used to measure the inflation component of the security.

To add the underlying index:

From any Eagle window, click the Eagle Navigator button to access the Eagle Navigator.
Enter Issue Viewer in the Start Search text box.
Click the Issue Viewer link to access the tool.
You see the Issue Viewer tool.
Click Add.
Click Equities and Index.
You see the Index panel.
Complete the options on the Index panel. See the Manage Indices page for more information.
The following fields are required: Index Name, Index Description, Ticker, Primary Asset ID Type, Primary Asset ID, Processing Security Type, and Asset Currency.
Click Submit.

Add ILB Securities

After adding the underlying index, add the ILB security using the Add Long Term Fixed Income panel. The underlying index security information is stored with the Underlying Information group of fields on the Add Long Term Debt panel.

To add the ILB security:

From any Eagle window, click the Eagle Navigator button to access the Eagle Navigator.
Enter Issue Viewer in the Start Search text box.
Click the Issue Viewer link to access the tool.
You see the Issue Viewer tool.
Click Add.
Click Equities and Fixed Income/Long Term Debt.
You see the Long Term Debt panel.
Complete the options on the Long Term Debt panel.
The system uses the value in the Processing Security Type field on the Long Term Debt panel to identify the type of long term debt instrument you are adding. To add an ILB security, select DBFLTP (Inflation Linked Debt Security). Additionally, select Fixed from the Coupon Type Code drop down list. The coupon rate does not change through the life of an ILB security.
When you select DBFLTP, the system displays additional fields that allow you to enter the underlying index information. Add the underlying index security information in the Underlying Security ID, Underlying Issue Name, Underlying Type, Dated Date CPI, ILB Index Precision, ILB Deflation Protected Maturity, and ILB Calculation Type fields. Eagle supports different inflationary income calculation methods for ILBs, as specified in the ILB Calculation Type field. The dynamic lookup for this field returns all values in the ILB CALC TYPE code category. See the ILB Calculation Type Code Values section for more information.
Click Submit.

Add Monthly CPI Index Rates

The monthly index values that are used to measure inflation are stored as variable rate records for the index security in the Variable Rates table, not for the ILB security. The values are three-month trailing values for the CPI index. That is, the processing of an ILB security for the month of May uses the CPI-U data available in February. The system calculates the daily CPI index rates based on the monthly values stored in the Variable Rate table. In the system, only the CPI rate for the first day of each month is needed to perform this calculation. You should not enter the intermediate daily CPI rates because doing so can cause incorrect calculations. Use the List Variable Rates panel to view the CPI rates entered in the table. See the Manage Variable Rates page for more information. The calculated daily CPI rates are also available for review in the income table and cost object. Note the source for the CPI-U rates should match the source on the entity record for the security that holds the ILB bond. If the sources do not match, the system cannot calculate the ILB index ratio.

To add the monthly CPI index rates:

From any Eagle window, click the Eagle Navigator button to access the Eagle Navigator.
Enter Issue Viewer in the Start Search text box.
Click the Issue Viewer link to access the tool.
You see the Issue Viewer tool.
Under the Issue Variable Rates menu, click Add Variable Rate.
You see the Add Variable Rate panel.
In the Source Name field, enter the variable rate source of the entity.
In the Asset ID Type field, enter the primary asset identifier type for the security, such as CUSIP, ISIN, and SEDOL.
In the Asset ID field, enter the identifier of the CPI index security.
In the Issue Name field, enter the name of the CPI index security.
In the Effective Date field, enter the CPI index date.
This value should be the day of the month that corresponds to the rate. For example, if you were updating the rate for the CPI-U for May, the effective date would be 5/1.
In the Variable Rate field, enter the rate of the monthly CPI index.
In the Schedule Period Types field, optionally specify the index reset frequency for reporting purposes.
Click Submit.

Long Term Debt Panel - ILB Options

The following are the key options for an ILB security. See the Long Term Debt Panel Options page for more information about the Long Term Debt panel. Note options may vary according to your selections.

Option	Tag	Description
Long Term Debt Details
Investment Type	11	Displays the investment type, such as FI (fixed income).
Processing Security Type	3931	Specifies the code value that the system uses to identify the type of long term debt instrument you are adding. An inflation linked bond must be set up with a processing security type of DBFLTP (Inflation Linked Debt Instrument). The system requires that you populate the underlying index with the index that the security marks to market for inflation, and also requires a dated date CPI (consumer price index) as part of the security master record setup.
Long Term Debt Coupon Periods
Coupon	70	Specifies the rate at which the security accrues interest. It is expressed as an accrual rate. A value of zero is required for zero coupon bonds.
Coupon Type Code	97	Indicates the type of coupon associated with the security. Options include: Variable Rate. The security has fixed coupon dates and uses a variable rate based on the security identifier to calculate the coupon for use in earnings. You must enter the rate in the Variable Rate table. Step Rate. The security has fixed coupon dates and uses a variable rate based on the security identifier to calculate the coupon for use in earnings. You must enter the rate in the Variable Rate table. The system recognizes this option as a step bond (also called a step coupon bond, step up bond, or step down bond). Fixed Rate. The security has fixed coupon dates and has a fixed coupon rate to calculate the coupon for use in earnings. Unscheduled Variable Rate. The security has unscheduled payments and accrues interest based on a rate you enter in the Variable Rate table.
Underlying Information
Underlying Security ID	1348	Specifies the underlying index that an inflation bond security measures inflationary adjustments against.
Underlying Issue Name	1141	Specifies the name of the underlying index that an inflation bond security measures inflationary adjustments against.
Underlying Ticker	1349	Specifies the ticker of the underlying index.
Underlying Type	916	Specifies the type of underlying index. Options include: Cheapest to Deliver Fixed Leg Float Leg Index Loan Pay Fixed Pay Float Primary Received Fixed
Dated Date CPI	1550	Specifies the value of the index that is used to measure inflation of an inflation bond security, as of the dated date of the security. It is used as a base line to measure inflation adjustment to the bond.
ILB Calculation Type	11808	Identifies the calculation method to use when calculating the daily CPI and the daily ILB index ratio. The lookup for this field returns all values in the ILB CALC TYPE code category. See the ILB Calculation Type Code Values section for a list of valid options for the ILB Calculation Type field.
ILB Index Precision	11017	Determines the decimal precision calculation of the ILB index ratio. The system supports a calculation of 12 places to the right of the decimal.
ILB Deflation Protected Maturity	11809	Determines if the security has the initial principal investment protected at the time of maturity. Options include: Yes. The system safeguards against deflation by guaranteeing that the principal payment at maturity is never less than the initial principal at issuance of the security. That is, par value. No. The system does not safeguard against deflation at the time of the maturity transaction. This means that the system creates a maturity transaction using the value of the ILB index ratio at the time of maturity, even if the ILB index ratio is less than 1.
ILB Min Index Ratio	3854	Specifies the guaranteed minimum ILB index ratio at maturity.

ILB Calculation Type Code Values

The following table displays the valid options for the ILB Calculation Type field.

Code Value	Code Name
30E_3M	Sweden
30_1M	Iceland
ACT_3J	Japan
ACT_3M	United States and Canada
ACT_4M	South Africa
AVG_6M	New Zealand (average CPI values)
AVG_GT1_6M	Australia (average change)
IDX_6M	New Zealand (actual CPI values)
IDX_GT1_6M	Australia (actual CPI values)
NONE_8M	United Kingdom Index-Linked Gilts
RATIOS	User Provided
RATIOS_SD	User-Provided (same-day earnings ratio)

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