Fund managers say the current volatility is likely to remain, with markets unimpressed by last week’s new European intergovernmental treaty.
European markets fell following the summit and investors are flocking to gilts as a haven from the eurozone crisis.
Yields on 10-year UK gilts fell to record lows of 2.07 per cent on Monday.
Fidelity Worldwide Investment head of asset allocation Trevor Greetham (pictured) says: “There are probably only two stable equilibria – full political union or break-up. With neither imminent, volatility is here to stay.”
Ignis Asset Management head of credit Chris Bowie, who runs the £249m Ignis corporate bond fund, says: “Credit will underperform government bonds over the next month and we are reluctant to add financials and European corporates.”
Eden Financial UK equity fund manager Leigh Himsworth says: “Fiscal union seems to be years away but if the Europeans do sort themselves out, financial markets could turn their attention to the UK and there is a risk that valuations in UK equities could fall.”