Getting the balance right

Opportunistic issuance of index-linked paper by a mass of utility companies last year reinvigorated the UK inflation swaps market. But will an expected decline in utility issuance this year create a supply/demand imbalance? Gareth Gore reports

UK pension funds have become almost resigned to dealing with problems. Chief among these were the slumping equity prices that decimated investment portfolios earlier this decade, fast-rising life expectancy, and the introduction of accounting rule FRS 17 in 2005, which required companies to calculate pension liabilities using a discount rate based on bond yields at a time when yields were squeezing tighter and tighter. The congestion in the UK inflation market at the start of last year, however