One additional peculiarity (which I think may be underappreciated by some) is that the differential between the FCF yield of the securities and the long-term government bond yield (the 170bp you have calculated with reference with the 10-year bond) is only sensitive to changes in real (inflation-adjusted) yields.
That is a natural consequence of TCL’s revenues (and therefore FCF, everything else being the same) being linked to CPI.
So, for instance, if the nominal yield increases by 100bp, but 80bp of that is inflation, then the yield differential will only decrease by 100bp-80bp = 20bp.
And it is obviously a lot harder for the real yield to rise by 70bp+ (thereby pushing the differential below 100bp, in your example) than it is for the nominal yield.
Which makes TCL’s intrinsic value a lot more resilient to moves in nominal yields than it may appear at a first glance.
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