Abstracts » Business

The case for hanging onto gilts

Article Abstract:

Investors in British government securities do not appear to be aware of retail price deflation, and yields price in an expected inflation rate of 4.1% from 2000 to 2006. Interest rates are rising, and this may lead to slower economic growth and a drop in rates later in 2000. World economic growth rates are increasing and this pushes up real bond yields. A rise in British productivity growth would mean a rise in real yields in Britain. Government securities offer a hedge against a possible drop in price for cyclical stocks, and against a possible Wall Street crash, which would lead investors to seek safe investments.

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Elusive reasons for holding gilts

Article Abstract:

United Kingdom government securities (gilts) have performed well in the late 1990s, but this has not always been the case. Gilts can offer a guaranteed wealth level for long term investors, and conventional gilts include an element to offset inflation. Index-linked gilts are only prefereable for investors who are pessimistic about inflation. Conventional gilts are suitable for long-term investors seeking to avoid risk who believe that the government's inflation target will be achieved.

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Diminishing interest

Article Abstract:

United Kingdom government securities have seen a drop in yields in the year to Jun 1999 and this has occurred for a number of reasons such as low inflation, stronger public sector finances and hopes that the United Kingdom may take part in European monetary union. Government bonds also became a refuge during summer 1998 when financial markets were hit by volatility. Corporate bonds have attracted many investors due to their higher yields. Corporate bond funds have proved popular, and investors should ensure that they understand the relationship between yields and risks when they invest in such bonds.

Capital market, Capital markets

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