Introduction to the Inflation Market

This course introduces the different products that can be used to trade, or hedge against, the rate of inflation.

It explains the market, the participants, and the motivation for wanting to be exposed to changes, or protected against, inflation. The course also explains the features and characteristics of inflation linked bonds.

Finally it looks at the use of swaps which are referenced against inflation. It shows how these can be used to change the investment profile of an asset.


This course is for individuals with a working knowledge of the bond market and options.

Learning Outcomes

At the end of this course delegates should understand:

  • The technicalities of the inflation market and inflation-linked bonds
  • Real yield and breakeven inflation
  • How to calculate linker coupons, adjusting for the inflation index lag


Course Content

The Inflation market

  • Inflation products
  • Market participants
  • Payers and receivers

Inflation linked bonds (“Linkers”)

  • Linker characteristics
  • Pricing linkers
  • TIPS yield curve
  • Inflation lag

Exercises: Calculating linker coupons adjusting for the inflation index lag

Breakeven inflation

  • Real yield and nominal yield
  • International breakeven curves

Exercises: Generating global inflation trade ideas

Inflation swaps

  • Zero coupon inflation swap
  • Asset-swapping inflation-linked bonds


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