12-29-2009, 10:49 PM
Whenever there is slowing down of the economy, interest rates drop. This impacts bonds because with decline in the interest rates, the price of bonds increases. Inflation adjusted bonds are those, which adjust the value of the bonds as per the rate of inflation, so that the value of the bonds do not subside. Although investing in bonds is safe but a condition, which is characterized by slow economy and increase in rate of inflation may hamper bonds.