Huge RPI swaps move catches market flat-footed

Some dealers said to have suffered losses after surprise decision to leave RPI methodology unchanged


The decision not to change the calculation methodology for the UK's retail prices index (RPI) yesterday caused the biggest move in inflation markets since 1987, traders say – a jump of between 30 and 40 basis points along the curve, which is thought to have caught out a number of dealers that had built short RPI swap positions.

"Looking at the way that move happened, it's my belief the Street was the biggest short, rather than hedge funds or real money participants," says Kari Hallgrimsson, head

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