“Whilst the government looks more like a house of the dispossessed, expect a bloodbath in gilt markets,” warns Bryn Jones, manager of the Rathbone Ethical Bond fund, and fixed-income spokesman for Rathbone Bros plc.
Gilts are soft on fears of a weak UK government, with the benchmark 10-year Gilt yield up nine basis points (0.09%) this morning.
“To achieve the aggressive levels of consolidation needed to sort out the fiscal and budgetary mess, we’re going need a strong government with a clear majority. Otherwise, beware the rating agencies who have their own way of demanding definition,” he adds.
There is a concern that investors had bought Gilts into the General Election to hedge against the prospect of a clear majority.
“This is clearly unlikely, and we expect a hard sell-off until a more lucid picture is apparent. We also expect the credit market to remain soft, as sovereign debt problems in Europe and contagion fears - although reduced, continue to stalk spreads.”
For further details please contact David Holloway, Head of Marketing at Rathbone Unit Trust Management (020 7399 0189).
The information contained in this note is for use by journalists and must not be circulated to private clients or to the general public. The opinions expressed here represent the views of the fund manager at the time of preparation and should not be interpreted as investment advice.
Rathbone Unit Trust Management Limited is authorised and regulated by the Financial Services Authority and a member of the IMA. A member of the Rathbone Group. Registered office: 159 New Bond Street, London W1S 2UD. Registered in England No. 2376568.