Inflation-Tied Notes Plummet to Five-Year Low

Global sales of structured notes linked to inflation fell to the lowest level in five years as record-low interest rates and negative real yields squeeze returns.

Banks led by Morgan Stanley and Landesbank Baden-Wuerttemberg have issued $1.12 billion of the securities this year, down 83 percent from the same period a year earlier and the lowest level since $475 million was sold in 2007, according to data compiled by Bloomberg.

Low interest rates are making it hard to design structured notes with appealing coupons, said Robert Hardy, a director of European rates structuring at Credit Suisse AG in London. That problem is being compounded by inflation that’s high enough to produce negative real returns on sovereign debt in countries such as the U.K. and the U.S., he said.

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