The problems with index-linked gilts

Article Abstract:

United Kingdom government securities (gilts) have attracted increased interest but they offer low yields and inflation could drop which could make conventional gilts more attractive. Index-linked gilts are often poor investments and it is difficult to assess what fair value should be for index-linked gilts. They tend to perform well when there is concern about stagflation, and it is unclear whether this is likely to occur in the UK. There are also differences of opinion on the impact of the US market on UK index-linked gilts.

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The beginning of the end for gilts

Article Abstract:

United Kingdom government securities (gilts) have seen a bull market but this could be at an end due to a global sell-off in the bond market. Bonds have been sold by investment banks and hedge funds which have had to raise cash. Gilts still appear expensive, even after this sale, if they are compared to equities. Gilt yields may fall if inflation falls, and if there is a flight to quality. Yields will also drop if the UK takes part in European monetary union.

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