European and UK bonds favourable

Bond market managers are scanning the horizon for signs as to which of the markets will be the winners in 2005. Some favour Europe on the back of weak fundamentals, others prefer the UK as it reaches a predicted peak in the current interest rate cycle. Mark Pearce, product manager for Fidelity's fixed income business, says: "We expect underperformance of US treasuries relative to Europe. The Fed is on course for raising interest rates to at least 3% by June and this has been priced into the markets. "The Fed has been clear in its growth forecast and expects moderate improvement. It is ...