The simple life

Rising inflation, combined with falling or stable interest rates, has left investors with mark-to-market losses on inflation range accruals. Instead, investors are turning to simple products offering protection against further increases in inflation. By Wietske Blees

Inflation range accruals were one of the big structured products stories of last year. Convinced the European Central Bank (ECB) would continue to hold inflation close to its publicly stated target of 2% - a goal it had more or less achieved successfully since its inception - investors flocked to products that paid enhanced coupons so long as European inflation remained within a specified range.

Buyers were helped by growing liquidity in an interbank market for inflation options, allowing