Investors are continuing to pile into gilts as fears deepen that the global economy could be teetering on the brink of a double-dip recession.
This week UK, US and German 10-year government bond yields all sank to record lows, with UK 10-year gilts hitting 2.88%, below this century's low of 2.93%.
Earlier this week, the Japanese yen strengthened to a 15-year high against the dollar, suggesting investors are treating the currency as a shelter from market storms.
Meanwhile, volatility in the major global stock markets and a widespread sell-off reflect investor conviction that central banks may have to implement further quantitative easing.
Federal Reserve chairman Ben Bernanke will make a speech at an economic symposium at Jackson Hole, Wyoming on Friday, and his comments are expected to drive more investors into the safety of gilts.
Jim Leaviss, head of retail fixed interest at M&G, says Bernanke is likely to admit things are "not rosy" in the US economy.
"Bernanke is coming under pressure from the Republicans in the US, so he will have to come out with something punchy. The message will be one of needing to be aware of the troubles," he says.
He adds the Fed chief will not announce further quantitative easing, following the second wave of ‘QE lite' already in progress.
"The gilt market would like another wave of QE. The treasuries market likes it up to a point but eventually it starts worrying about the longer term."
In the long run QE might prove to be a concern as people consider the impact on inflation of continuing to print money, Leaviss adds. "Fears about inflation have now taken over fears about deflation, and that is what we are looking out for."
