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Short-dated bonds take a hit

The base rate rise last week resulted in a heavy sell-off of Government bonds.

Short-dated bonds reacted particularly badly to the news, with longer-dated issues holding up better.

Many bond managers expected a rise at some point in 2007, with managers including M&G fixed-interest specialist Richard Woolnough positioning their funds in anticipation.

The early increase has left managers unsure as to which direction rates will take next.

Hargreaves Lansdown head of research Mark Dampier says: “It was a good decision to lift interest rates early as it keeps everyone on their guard. Equities are bound to have a more bumpy year but their strong returns should see them continue to do well.

“The picture for bonds is not so rosy as attempts continue to cull inflationary pressure with further rises of 0.25 to 0.5 per cent dependent on inflation data due out soon.”

Threadneedle head of Government bonds Quentin Fitzsimmons says: “We had acknowledged the risks of further tightening early in 2007 but believe that lower rates before the end of the year remain plausible.”


Asset mix has been overegged

Mark Dampier is entitled to believe, whatever the evidence to the contrary, that there is any reliable way of selecting superior active managers cost-effectively but he seems to have been misled on the issue of the importance or otherwise of asset allocation to the investment process (Money Marketing, January 11). He refers in his column […]

FTBs hit by income multiple high

First-time buyers saw affordability pressure continue to bite as income multiples reached their highest-ever level in NovemberMultiples were at 3.29 times the average first-time buyer household income, according to data from the Council of Mortgage Lenders. This was up from 3.27 times in October, and 3.08 times in the same month last year.The new figures […]

Aviva chief Harvey is retiring early

Aviva group chief executive Richard Harvey is to retire in July, earlier than expected.Harvey led the demutualisation of Norwich Union in 1997 and spearheaded the merger of the company with CGU to create Aviva in 2000.He has been chief executive at Aviva for 10 years and is a former chairman and board member of the […]

State of the markets: global growth

In conversation with journalist Alexis Xydias, Artemis Global Growth Fund manager Peter Saacke discusses the state of global markets and how he is positioning his fund. Peter gives his views on the growth potential of US, Europe and emerging markets, each of which is on a different stage of the road to recovery. And with a […]


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