AXA expects 'wide' credit spreads to remain

He pointed out that gilts were not particularly attractive investments at the moment, with the benchmark 10-year issue offering a yield to maturity of 4.38pc. With inflation likely to average at least 2pc a year and with the risk of it being higher, the real return was liable to come under pressure, said Iggo. He explained: "A simple valuation rule of thumb for long term bonds is to compare yields with expected average nominal economic growth. "In the UK that is a result of something like 2.5pc real GDP and 2-3pc inflation, given a nominal GDP growth rate of 4.5-5.5pc. Gilt yields are...