Search for safety feeds inflation derivatives market

摘要

Bill Gross, CEO of the world's largest bond fund, Pacific Invest-ent Management Co (Pimco), kicked off 2004 by coming out in favour of inflation-linked bonds. US Treasury notes that protect against faster inflation are the best investment as the economy grows, he said: "Tilt your Treasury duration in the direction of inflation-protected securities. We have been." Mr Gross's words will have provided a welcome boost to business on inflation-linked issuers' and originators' desks, but business is already more than strong. As commodity prices soared and interest rates and corporate earnings rose at the end of last year, inflation fears were rising not far behind. But although the appetite for inflation-protected assets is poised to reach an all-time high, knotty questions about supply meeting demand remain. The inflation-linked bond market is still relatively young: the UK government began issuing inflation-linked bonds in 1982 but the US and France did not begin until 1997 and 1999 respectively. Since then, France has ramped up its inflation-linked issuance sizeably, Italy and Greece issued bonds during 2003, and similar plans are now being discussed in Germany, Switzerland and Japan.