Australia inflation swap market moribund despite price rise expectations
Seven years ago inflation swaps dominated the Australian inflation market but now the market has become illiquid with most activity on physical inflation-linked bonds. Why has the market made a 180 degree turn and is this the end of the inflation swap market in the region?
If inflation really is, as Ronald Reagan said, "as violent as a mugger", then Australia is standing on the cusp of an increase in crime. Inflation figures for the first quarter of 2014 show consumer price index (CPI) inflation rising to 2.9% year-on-year from 2.7% in the previous quarter. According to Crédit Agricole, inflation will remain elevated through the rest of the year, which could see it exceed the Reserve Bank of Australia's target of 3% for the first time since 2011. This may prompt
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