June 3rd, 2015, 8:59 am
When looking at market quotes for zero coupon inflation swaps in EUR / HICPXT I have (for say, the 5y swap)29-May-2015 1,067501-Jun-2015 1,0725so +half a bp up, not very much. If I understand the conventions correctly the basis months and Fixings for these two quotes are howeverMay-3m => Feb-2015 115,87Jun-3m => Mar-2015 117,20If this is true I get an expected CPI (for the 5y pillar) of around 122,188 for the 29-May and 123,621 for the 01-Jun, which is a big move upwards.Assuming that the market perception for the expected CPI did not change drastically from 29-May to 01-Jun (or did it ?), why do the market quotes not adjusted to the changing basis month to even out the rise in the new basis Fixing ?Where am I wrong ?