gilts

Investors flocked to buy index-linked gilts in a Debt Management Office(DMO) auction yesterday, despite real yields being the lowest since the bonds were first offered in the early 1980s.

James Burns, head of the multi-manager desk at Smith & Williamson, said he sees investment opportunities in Europe, Japan and the United States (US).

Investors who go it alone will have to dedicate ten hours a week to managing their portfolio in order to beat inflation, according to one external asset manager.

Income is the dominant theme among investors at the moment, with the focus on UK equity income spreading to other areas including Asia and emerging markets, according to Adrian Lowcock, senior investment manager at Hargreaves Lansdown.

Taxpayers could face a £100 bn bill for the loss of Britain's much-prized AAA credit rating. The staggering sum, equivalent to 5p on the basic rate of income tax, comes from the Treasury's own forecast for a worst-case scenario.

Andy Brown, investment director at Prudential's Portfolio Management Group, believes there is great value in the corporate bond market and that noise to the contrary is overdone.

Benchmark ten-year gilt yields have moved back above 2% for the first time since last May as the equity rally is mirrored by a sell-off in core government bonds.

GILT SELL-OFF

Five years on and the financial crisis shows no sign of ending. But many investors, understandably fearing the prospect of further shocks, are looking in all the wrong places, says Tim Price, investment director at PFP Wealth Management.

Strategic bond fund managers Richard Hodges from LGIM and Fidelity's Ian Spreadbury both expect UK government bond yields to remain at their abnormally low levels for the foreseeable future.