Decoded No. 10: Index-Linked Debt and Oil (full note, PDF)

Decoded, analysis note No. 10. Driss EFFINA, PhD. October 2026. PDF, 25 pages, 13 charts and diagrams, 9 tables.

When a war closes a shipping lane, the price of crude reaches a government’s interest bill through a chain with five links: Brent, the pump and the heating-oil tank, the consumer price index, the indexation uplift on inflation-linked bonds, and the accrued debt interest recorded in the public accounts. This note measures that chain for the United Kingdom, where index-linked gilts make up 23.8 percent of the gilt stock, and compares it with France (OATi and OAT€i), the United States (TIPS), Germany (Bund linkers, no new issuance since 2024) and Canada (Real Return Bonds, issuance stopped in November 2022). It combines official 2026 data on pump prices, RPI weights, the gilt portfolio and monthly public finances with four tools built for this note: a bottom-up model of the oil effect on the RPI; a month-by-month accrual model of the capital uplift, validated against the ONS figure for September 2026; a cross-country measure of the footprint of the energy shock on each bond’s reference index; and a scenario model of RPI and linker costs to 2028.

Inside the full note:

• Five linker markets in 2026
• The oil-to-interest chain
• How much has the 2026 oil shock added in the United Kingdom?
• Five countries, one shock
• Sensitivity tables
• The 2030 cliff: what the RPI reform changes
• Should the DMO cut linker issuance?
• Scenarios to 2028
• Leading-indicators dashboard
• Implications for the Treasury, pension funds and investors
• What to watch

Read the free preview: Index-Linked Debt and Oil.