Ten-year gilt yields could rise as high as 5 per cent if the general election results in a hung Parliament
On Tuesday, 10-year gilts were yielding 4.06 per cent. A hung Parliament could lead to a short-term increase in yields if no common fiscal plan can be devised.
Henderson head of retail fixed income John Pattullo says the market is aware of the concerns and is largely positioned for the event. He says: “The only thing that has not been priced in is a Liberal Democrat surge. I would not be surprised if yields hit 4.75 or as high as 5 per cent. There are lots of gilts needing to be issued but I think if it hits that point we may start seeing people looking to buy.”
Aberdeen head of global strategy and asset allocation Mike Turner says: “The rise will be a kneejerk reaction but it will not be to the tune of 0.75 per cent or more. That would only happen if no moves are being made to tackle the deficit, which is not the case. There would be buyers if it did get to 5 per cent.”
Whitechurch Securities managing director Gavin Haynes says: “If they moved out to 5 per cent, we would start to buy them but it would be bad news for those invested in them with regard capital losses.
“However, it is likely to be short term so those invested should not sell out.”