GDP-linked bonds: a commentary on a termsheet

Extract

...

Introduction the London Termsheet—its role and ambition

Early in 2015, an ad hoc working group came together to draft a termsheet for gross domestic product (GDP)-linked bonds and through it engage more effectively with the market community. The effort resulted in the first iteration of the draft termsheet, dubbed the ‘London Termsheet’. The London Termsheet setting out the key terms for a new GDP-linked bond was proposed with two aims in mind. First, to suggest a particular design for such a security which could serve as a ‘straw-man’ enabling discussion participants to focus on a concrete proposal for a new market instrument and voice their preferences. Secondly, and more ambitiously, to start a discussion whose practical end would be to settle the terms of a GDP-linked bond so that market participants could move to the meaningful part of issuance and subscription by reference to the London Termsheet. As the debate continues, updated versions of the London Termsheet will be found on the Bank of England website and those of organizations which participate in the debate.¹