Traders in $7 Trillion Market Turn to Obscure Option to CPI Data

Traders in a $7 trillion market are grappling with the unprecedented scenario of having to price securities tied to US inflation without any consumer price data.

With the US government shut since the beginning of the month the data void is likely to be prolonged, especially after the White House said the US probably won’t release inflation data for October. That’s leading investors to explore untested fallback mechanisms embedded into inflation-linked bond and derivative legal documentation decades ago as an alternative.

These contingency plans reflected a tail risk that until recently was hard to imagine given the systemic importance of ...