Spotlight On Inlfation-linked gilts

Proposed changes to measuring UK retail price inflation have had significant influence on the prices of long-dated index-linked gilts. The Chancellor of the Exchequer has delayed a proposed realignment of UK RPI with a consumer price measure (CPI-H) until at least 2025. CPI-H has historically been about 1% lower than RPI, thereby reducing future cashflows from index-linked gilts. Anticipating the changes has had an immediate influence on the prices of ILGs maturing after 2025. Using non-gilts to access the UK index-linked market may be attractive.