Supply-side economics

Pension funds have been keen buyers of inflation as part of their liability-driven investment strategies. Much of the inflation supply has come from utility companies, but with the credit markets grinding to a halt, some question whether this is sustainable. By Radi Khasawneh

The UK inflation market has been thrown out of whack by a severe supply and demand imbalance, which has caused a distortion in pricing and a sharp slowdown in trading activity. Inflation supply has slowed to a trickle in the past few months, as turmoil in the credit markets takes its toll and monoline insurance companies - used to wrap much of the corporate inflation-linked bond supply to date - look increasingly fragile. With more UK pension schemes turning to inflation bonds and swaps than