In a surprise move, the Canadian government said earlier this month that it had decided to cease issuance of real return bonds (RRBs), citing low demand. That makes them an expensive form of financing for the government, but cost should not be the only consideration, investors say. The median allocation by defined benefit pension plans, a major category, to RRBs was 5.2% in 2021, data covering members of the Pension Investment Association of Canada (PIAC) shows. U.S. Treasury Inflation-Protected Securities (TIPS) could act as a proxy but are not an exact hedge against Canadian inflation. Breakeven rates are the difference between yields on nominal and real return bonds.

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