Deutsche Bank launches first tradable index tracking core US inflation

Sep 4th, 2012 | By | Category: ETF and Index News

Deutsche Bank has announced the launch of the DB Core US CPI Index (Bloomberg ticker: DBLNCPI, Reuters RIC: DBLNCPI), the first tradable index that tracks core inflation.

Deutsche Bank launches first tradable index tracking core inflation, DB Core US CPI Index

Deutsche Bank has announced the launch of the DB Core US CPI Index, the first tradable index that tracks core inflation.

The DB Core US CPI Index, tradable on an over-the-counter basis, is designed to track the Core Consumer Price Index (CPI).

The Core CPI, a widely used measure of inflation, excludes the most volatile components of overall CPI, thus demonstrating a more accurate measure of the overall trend in consumer prices. The DB Core CPI Index is transparent, rules-based and enables clients to obtain protection from inflation while reducing volatility risk.

Deutsche Bank is actively quoting over-the-counter swaps that pay the return on the DB Core US CPI index versus fixed rates. As of August 31, two-year inflation swap prices on the DB Core US Inflation Index are implying 1.5% annualised inflation over the next two years.

“The DB Core US CPI Index reflects Deutsche Bank’s continued innovation and commitment to expand the tools available to our clients,” said Aram Flores, Head of Index Research for the Americas. “We expect this index to be a significant barometer for the industry and a more accurate measure than other tradable inflation strategies.”

“We are seeing interest from clients for a variety of reasons that include obtaining exposure to a more stable measure of inflation, greater diversification from other assets classes, and using the DB Core US CPI Index as a better proxy hedge for more specific inflation exposures than they may have,” said Allan Levin, Head of Inflation Trading for North America.

While there has been no indication whatsoever from Deutsche Bank that its db x-trackers exchange-traded product (ETF) platform will be examining the index, the firm does offer an ETF based on Eurozone inflation. A product based around a measure of US inflation, therefore, may be seen as a useful addition to the range.

The platform’s existing inflation-based ETF, the db x-trackers II EUR Inflation Swap 5 Year Total Return Index ETF (XIF5), is designed to reflect the performance of a long position in a series of inflation swaps based on the Eurostat Eurozone HICP All Items Ex Tobacco Index and a long position in the Deutsche Bank EONIA Total Return Index. The fund is listed on the Deutsche Börse Xetra, Borsa Italiana and SIX Swiss Exchange, and is registered for distribution across much of Europe including the United Kingdom.

The DB Core US CPI Index represents the latest addition to Deutsche Bank’s DBIQ Index family of benchmark indices, which includes indices covering the global fixed income, FX, equities and commodities asset classes.

The DBIQ index team has form in the ETP space and last year teamed up with PowerShares to launch a pair of ETNs, the PowerShares DB US Inflation ETN (INFL) and the PowerShares DB US Deflation ETN (DEFL). These are based on DBIQ’s duration-adjusted inflation and deflation indices, respectively, and are intended to capture movements, whether up or down, in US inflation expectations or deflation expectations.

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