Losing the asset swap lifeline?


The asset swap was a lifeline for the inflation derivatives market during the financial crisis, providing a valuable source of inflation supply for dealers and hefty returns for investors. But now asset swap prices have dropped back to near-normal levels, appetite for the trade has declined. For dealers needing to service high demand for inflation swaps, it could pose a problem in those markets where there is no other natural source of inflation supply.

The popularity of the asset swap during th

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