A NOTE ON THE USE OF INDEX CLAUSES ABROAD

Abstract

IN VIEW OF the current discussion on variable annuities in this country and of the recent debate on constant-purchasing-power bonds both here and in the United Kingdom,' the article on French index bonds in the December, 1959, issue of this Journal' will undoubtedly stimulate interest in the foreign experience with such securities and with index clauses in general. As the author of the article points out, the variable-return bond a financial instrument significant beyond the confines of the French capital market3 and been outside France.4 It may be debatable whether other foreign countries have merely imitated the French model or decided to experiment on their own, but it is certainly true that clauses linking security redemption values (and occasionally interest payments) to a specific index have been employed abroad fairly extensively during much of the postwar period. In some countries, moreover, such clauses have been applied not only to bond issues but to other financial contracts as well. The present note gives a brief, comparative survey of the various financial sectors to which indexation has been applied abroad and of the techniques and index links that have been adopted.