Gilts set to underperform bonds, cash and equities

Gilts look set to underperform global bond benchmarks going forward, with the short end of the market having overshot the most likely path of base rates. If global bond yields do not fall significantly, gilts are also likely to underperform cash and, if further signs emerge that global growth is troughing, equities as well, according to Michael Saunders, analyst at Salomon Smith Barney. Saunders believes the short end could be over-discounting global risks to growth. "Two-year yields are 30bps-40bps below the consensus forecast for the average level of three-month rates at the end of this...