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Banking

Derivatives Markets: What’s behind the boom year for sterling linkers?

Roger James finds out why the latest United Utilities water deal continues an amazing year for the UK inflation-linked market.

A version of this article first appeared in Total Derivatives.

Total Derivatives is the prime source of real-time news and analysis of the global fixed income derivatives markets.


Tom Fallon, UUW
“If someone had said 18 months ago that 18% of our regulatory asset value would be funded by index-linked bonds and that our maturity profile would have risen from an average maturity of 13 years to 30 years, I wouldn’t have believed them”
Tom Fallon, UUW

The latest inflation-linked offering from prolific UK issuer United Utilities Water came to the market in mid-November, a £35 million ($66 millon) 50-year issue lead managed by Royal Bank of Scotland. The deal carried a low 1.3805% coupon and was priced at par. No big news there then: after all such deals are 10-a-penny, and by the recent standards of utility issuance, this is rather on the small side. Certainly it is believed that much larger utility linker bonds are in the pipeline.


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