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Capital Markets

Inflation-linked products debate: Putting a price on inflation

The market is relatively young but it has had a brutal education over the past year as the financial crisis has swept through every corner of the financial markets. Where next for inflation-linked products?

Delegate biographies: Learn more about the panelists 

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Executive summary

• The inflation-linked market has faced its own set of difficulties in the financial crisis

• Inflation is no longer the key issue. Now investors seek deflation protection

• Volatile commodity prices have had a big impact

• Government debt managers are now more alive to counterparty concerns

• Pension funds face a difficult choice between volatile equities and low-yield inflation-linked bonds

MH, Redington 2008 was a cataclysmic year. What has the credit crunch meant for us?




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CA, RBS The inflation market is still young, so supply and demand is crucial to how it operates and prices. Several years of favourable terms for long-dated corporate issuance, cheap monoline wrapping and attractive asset swap levels meant that we came out of 2006/07 with our most balanced market yet, particularly in the UK. For the first time, even inflation swaps were trading at a discount to bond breakevens.





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