Searching for the truth behind falling gilt yields

Why did gilt yields plunge in 2005? Conventional wisdom is the key factor was strong demand from domestic pension funds and insurers seeking to neutralise long-term liabilities. In fact, official figures show these institutions bought just £5bn of gilts in 2005, down from £16bn during 2004. By contrast, foreign buying surged from £2bn in 2004 to a record £29bn last year. This phenomenal rise has attracted surprisingly little comment. Perhaps conventional wisdom is so entrenched few analysts have bothered to examine the data. Perhaps people assumed foreign buying had been confined to short...