Index-linked gilts to stay the odd man out

Article Abstract:

United Kingdom index-linked government securities (linkers) are attractive according to some fund managers, because long-dated linkers' yields ahve risen to more than yields for equities. This has tended to be a good signal to move from equities into linkers. There is a debate as to whether past trends can be extrapolated in this case. The notion that equities should yield more than linkers could be a local peculiarity which is no longer relevant. Risks from stocks and inflation could have fallen and this could mean that returns do not have to be so high for equities.

Government Bonds, Stock-exchange, Stock exchanges

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A shock in store

Article Abstract:

The United Kingdom equity market is likely to be affected by long bonds, argues Richard Jeffrey from Charterhouse Tilney. Yields for UK government securities (gilts) could remain stable which would help stock prices, but stability for gilt yields appears unlikely. Speculation about European monetary union (Emu) has affected gilt yields, but the UK is not likely to join Emu due differences in the business cycles of the UK and mainland Europe.

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