Goldman Sachs has announced that it will use Chicago Mercantile Exchange’s Globex platform to conduct the USA’s first derivatives auction tied to the core consumer price index, CPI.The auction, from 6am to 7am CST tomorrow, precedes the release of the government’s inflation price report at 7:30am. Traders will be able to bet on the data, which measures prices excluding food and energy, or hedge the risk of positions in other markets, such as interest rates.

The creation of the core CPI derivative was a response to a recent spike in investor sensitivity to inflation data, said Goldman’s vice president of the economics derivatives group William Cassano. "These numbers go in and out of focus. Right now all eyes are on inflation," he said. The core consumer price index is likely to have risen by 0.2% in May, following a 0.3% gain in April, according to a Reuters survey of 76 economists.

Inflation is becoming an important number across the globe as fears emerge of its rise, or even a possible period of ‘stagflation’, and an increasing number of product issuers are designing products with inflation as either the major component or one among several in a best-of or rainbow payoff.

There are 11 inflation-linked products on our US database and two still open to investment, both sold through banking networks. Morgan Stanley’s 2.5-year Inflation Coupon/Commodity Linked Securities is a growth and income product linked to the DJ AIG Commodity and the CPI.

The product pays a monthly coupon linked to the CPI, with a floor at zero and an initial level taken as 12 months prior to the month of reporting.

At maturity, the product repays capital plus or minus the rise or fall in the DJ AIG Commodity Index over the investment period.

The product is open now and closes 15 June.

Merrill Lynch’s Inflation Linked Notes is a capital-protected income product linked to the CPI, paying an annual coupon of between 9% and 11%. For every month afterwards, the coupon is 150% of the rise/fall in the CPI, floored at 0%.

The final CPI level is taken as the level three months prior to the current month. The initial CPI level is equal to the level 15 months prior to the current month.

This product is open now and closes 23 June.