UK inflation swap basis set to widen on green energy push

Hedging of planned wind farms will make bilateral receiver swaps cheaper versus cleared, say traders


Energy firms hedging upcoming offshore wind projects are expected to push the LCH-bilateral inflation basis significantly wider in the coming months, making bilateral trades cheaper than cleared ones for pension funds and insurers.

The basis, which represents the difference between rates on cleared and bilateral inflation swaps, stems from a persistent supply-demand imbalance in the UK market. Corporates tend to be payers of bilateral inflation swaps, while buy-side firms such as pension funds

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