Activity and price discovery in euro area inflation-linked swap markets

Benjamin Böninghausen

Economic Bulletin Articles, 2025, vol. 5

Abstract: This article presents evidence from transactions data reported under the European Market Infrastructure Regulation (EMIR). Its aim is to assess the information content of euro area inflation-linked swap rates as measures of inflation compensation. It finds that both the breadth and the depth of overall activity have increased notably. The process of price discovery resulting from trading activity appears healthy on aggregate, and the sectoral composition of activity has shifted towards counterparties that can be deemed more responsive to changes in the inflation outlook. In particular, the hedge fund sector has increased its share of activity. An increasing share of transactions therefore seems to have been underpinned by the continuous updating of views on the inflation outlook. JEL Classification: E44, G14, G23

Keywords: derivatives transactions data; EMIR; inflation; market-based inflation compensation; market imperfections; price discovery (search for similar items in EconPapers)
Date: 2025-08
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