Cash is no longer king, with investors now focussed on returns rather than the risk of a banking collapse, according to Ian Williams, manager of City Financial's Strategic Gilt fund.
With UK bank deposits benefiting from enhanced guarantees, Williams says investors are now looking beyond cash, and he sees base rates falling to 3pc by mid-2009, with some savings deposits rates likely to fall to as low as 1pc. "It seems quite clear that fear of recession, no longer inflation, is the driving force behind policy making in Downing Street. Given the tools available to the Chancellor, the outcome will likely be much lower short-term interest rates," he explained. In contrast, 15 year gilts are currently yielding around 5pc, while certain blue chip equities are returning...
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