Kames Capital bond manager Phil Milburn predicts the UK will lose its AAA rating by the end of next year.
In February, Moody’s put the UK on negative outlook, raising the prospect that it may be downgraded.
Milburn (pictured), who runs the £568m Kames Strategic Bond, says a rating drop is inevitable.
He says: “I would be genuinely shocked if the UK finished next year being AAA rated. We have run up too much debt on banks’ balance sheets and too much personal debt.
“Losing the AAA status is more likely to be felt through sterling rather than gilts, because the Bank of England can buy an unlimited number of gilt whenever it wants. Sterling may be weakened, as overseas central banks may decide we will stop putting as much of our currency reserves in sterling.”
Milburn says if a downgrade causes gilt yields to move up more than 10 basis points, he would buy gilts in the Strategic Bond fund.
City Asset Management head of research James Calder says: “I think we are likely to hold on to our AAA rating. The outlook for the UK is stable and employment is high.”