Bloomberg News

Barclays Says U.K. Inflation Review May Not Affect Linker Market

May 25, 2012

A U.K. review into how inflation measures are calculated may “come to nothing” and doesn’t justify changing investments in inflation-linked bonds, Barclays Capital said.

“We consider this to be an issue worth monitoring, but do not at present believe it warrants a shift in investor positioning,” economists Simon Hayes and Alan James in London wrote in a note today. The Times newspaper reported earlier today that the examination may change retail-price index calculations enough for the Bank of England to rule this would have a “material” impact on holders of so-called linkers.

“We are currently a very long way from this endpoint and we see a high likelihood that the change in aggregation methodology does not materialize,” the economists wrote. They added that the review has reached an “empirical impasse” that is likely to “block any steps to change the way either” RPI or the consumer-price index is calculated.

A summary of the Consumer Price Advisory Committee’s April meeting, published on the Statistics Authority’s website, show the panel will consider the review at its July 3 meeting.

To contact the reporter on this story: {Jennifer Ryan} in London at jryan13@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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