Demand gridlock

Corporate Risk - Profile

risk0407-pg82-stevens-jpg

Pressure from the UK Pensions Regulator for pension funds to wipe out their funding deficits drove many to snap up any long-dated assets available in early 2006 - especially the few long-term inflation-linked bonds then on the market. Yields on the UK's 1.25% 2055 inflation-linked gilt fell to a record low of 38 basis points in January last year, as pension funds piled into the inflation market.

UK issuers, and in particular those with revenues linked to inflation, took advantage of these low