UK gilts: politics priced in

Article Abstract:

UK government securities have seen a rise in yields compared with German bonds, and this indicates that the market has taken into account political risks in the UK, according to Nikko Europe's Simon Briscoe. The markets are not especially concerned about risks from a Labor government since the Labor party's policies on macroeconomic issues and market liberalization are little different from those of the ruling Conservative party. A greater risk would occur if there was no decisive result in the next election.

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UK gilts: falling yields

Article Abstract:

HSBC Markets foresees falling yields for UK government securities (gilts). Pay settlements may drop, and lower mortgage rates should take pressure off wages. Consumer spending is rising, but not by a great deal, while manufacturing industry is subdued. Low inflation and a lower growth than forecast mean that interest rates are less likely to rise. The price of gilts could rise in 2nd half 1996, with ten-year yields dropping to 7.2%.

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