U.S. issuers of inflation-linked bonds are expected to pile into the interest rate swap market this year to offset their exposure to inflation. Insatiable retail demand for inflation-linked debt has encouraged recent issuers, such as Household International and SLM Corp., to tap the market. Issuers of inflation linked bonds are more ready to accept LIBOR-based exposures than those linked to inflation, said an interest rate derivatives head. This likely will encourage more CPI- to LIBOR-based swaps, he added.
Household has issued USD450 million in inflation-linked debt since last September and demand remains strong, according to Mark Friedlander, spokesman in Prospect Heights, Ill. The corporate enters into swaps to get out of inflation on a weekly basis, he said.
