From the Q&A on the PRIIPs KID:
4. The principal component analysis of Annex II, Point 23 ensures the consistent simulation of curves. Is it mandatory to use this method also for PRIIPs that depend on only one interest rate underlying, e.g. bonds with yearly coupons of max (12m EURIBOR + 0.5%, 0.3%)?
A PCA is required whenever an interest rate or interest rates are observed at multiple times in the future. The purpose of the PCA is to capture the correlation between interest rate movements at different points of time in the future. In the example given a PCA would be needed. (Published 4 July 2017)
I'm simply at loss what they're up to in this answer. If only 12m EURIBOR matters, what kind of "correlation" should we even be interested in? We have one dimension .... how to do a PCA here?