View more on these topics

Gilt yields could fall to 2% says M&G’s Leaviss

M&G head of retail fixed income Jim Leaviss says yields on mid- and long-dated gilts could fall to as low as 2% following the launch of the Bank of England’s quantitative easing programme.

Gilts with maturity dates of over five years and under 25 years rallied strongly ahead of the BoE’s unprecedented reverse auction on Wednesday, the first step in its plan to buy up to £75 billion of government debt from institutions. Yields have since fallen to around 3 per cent.

Further auctions are scheduled for next week when the Bank will bid for £2bn of 10 to 25-year bonds on Monday and £3bn of 5 to 10-year bonds on Wednesday.

Leaviss says it is “extremely dangerous” to be short of the gilts market for the foreseeable future because the Bank of England has indicated that it is prepared to buy the securities at whatever price current holders are willing to demand at the auctions.

He says: “The Bank is saying: ‘we will buy gilts at whatever level you want to sell them to us because we want you to buy risky assets instead’. So, far from being dear at 3 per cent yields, ten-year gilts could rally to 2 per cent, or even lower. Remember, Japanese 10-year government bonds hit yields of 0.5 per cent in 2003.

Recommended

Tories lead lobby for IFAs

The Conservatives are urging the Government not to forget the plight of IFAs in any review of the Financial Services Compensation Scheme levy structure.

Protection exam pondered

Norwich Union Life is in discussions with the Chartered Insurance Institute about launching a protection exam for advisers.

Five reasons for optimism in India

By Kunal Desai, Head of Indian Equities at Neptune Investment Management Following the MSCI India Index’s 26.4 per cent return in 2014, stemming from a 7.3 per cent rise in GDP, investors have recently become increasingly concerned about India’s future growth potential. What has happened to India’s reform agenda and are there any signs of […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment