The case against index-linked gilts

Article Abstract:

United Kingdom inflation will stay at an average of 2.5% if the inflation target is met, and yield spreads for index-linked government securities (gilts) and conventional gilts should remain at 2.5%. Yields for both types of bonds should move in line with international yield changes, or interest rates in real terms. Index-linked gilts could be more volatile than ordinary gilts. They are still worthwhile for investors with future liabilities, and inflation may not stay at an average of 2.5%.

Economic aspects, Indexation (Economics)

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The real problem with gilts

Article Abstract:

United Kingdom government securities (gilts) have seen yields drop to levels previously only seen in 1964, and long bonds have a lower yield than cash. Inflation has become more subdued, which helps explain the drop in yields. Gilts can still outperform cash, even when yields are below cash, as is shown by history. Inversions of yield curves are often followed by recessions. There is a debate on whether a recession is likely in the UK, and whether equities are to be preferred to gilts.

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Political worries hold back gilts

Article Abstract:

The UK gilts market continues to bedominated by currency factors despite the lowering of the German discount rate by theBundesbank. The government is attempting to make gilts more attractive especially to foreigninvestors and it is estaimted that gilts sales in 1995-96 will total 23.1 billion poundssterling.

Usage, Securities

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