Remapping the future

Sweden, the Nordic region's only government payer of inflation, is cutting back on borrowing, presenting difficulties for the nascent inflation derivatives market. But officials are determined to keep the market going, and dealers say more Swedish inflation-linked products are on the horizon. By John Ferry

A perennial problem for traders hoping to make a market in inflation is the lack of supply. In many markets, there are not enough natural payers of inflation, such as national or local governments, utilities or other companies with inflation-related revenue streams, to satisfy the needs of investors. With European pension funds and insurance companies scrambling to cover their inflation-linked liabilities, and with banks eager to obtain inflation-linked bonds so they can strip out the inflation