Pattullo: Look beyond a largely irrelevant election

Gilts have rallied significantly into the Election, more driven by the UK by being associated with the core of Europe than the chance of a significant Tory majority.

We may be in considered in better shape than the periphery, but we have adjusted via weak sterling. Regarding governments, most investors would prefer a majority to push the required austerity package through - a majority government implies a mandate from the people to carry out their election pledges.

It seems counter intuitive to suggest a hung parliament is positive in the UK. A hung parliament seems a current focus issue.

I am much more concerned about the excessive gilt supply and hugely sceptical of the ability of any western government to run the necessary fiscal surpluses for sufficiently long period to stabilise the deficit ratios.

Longer term monetisation and inflation seems increasingly inevitable.

John Pattullo is the head of retail fixed income at Henderson.