Abstract: In this paper, we analyze the importance of inflation-indexation of a part of government debt. We first establish that the degree to which uncovered sovereign spending shocks are inflationary is increasing in the share of inflation-indexed debt in the overall government debt portfolio. We leverage this finding to introduce inflation-indexed debt in a model of the Fiscal Theory of the Price Level (FTPL), where we show that: (i) even absent further frictions, inflation-indexed debt makes the price level backward-looking (i.e., it becomes a state variable), (ii) it tightens bounds that pin down 'active fiscal policy', and (iii) in a calibrated HANK model, a one percentage point increase in the share of inflation-indexed debt in overall government debt increases the volatility of the response of inflation to government spending by up to 4% relative to a no-indexed debt baseline case in a world of fiscal dominance.