Why you will not lose money in gilts, bunds or treasuries in 2012

Investors can continue to buy 10-year debt issued by safe haven governments in 2012, with the risk of losing vast sums diminished, said Kames Capital's David Roberts.

Roberts, co-head of fixed income at the asset manager, said with interest rates pegged where they are for the foreseeable future, and yield curves steepening at the long end to make up for inflation, there is little reason why investors should sell at current levels.

"I do not think there is a danger of losing lots of money in gilts, bunds or treasuries this year," he said.

"Short-dated rates are well anchored (as highlighted in the latest FOMC minutes) and curves are almost steep enough to compensate for future inflation."

Yields on gilts, treasuries and bunds all tumbled last year as the eurozone crisis erupted, and they remain near record lows after a cautious start by investors in 2012.

This morning, 10-year gilts were yielding 2.15%, while treasuries were at 1.93% and bunds at 1.9%.

Last year government bonds from the three countries were one of the best asset classes to buy for returns as prices spiked, but Roberts (pictured) warned investors not to expect a similar gain this year.

"It will be difficult simply to own core markets and hope prices go inexorably higher, as was the case in 2011," he said.

"Falling US unemployment, global growth scheduled to be around 4% and above target inflation may prove a dangerous cocktail, but that is likely to be a late second-half story as far as I can see."

His current strategy centres around buying when the bonds yield above 2% and selling when they dip below 1.75%.

"For now, buying core 10-year bonds above 2% and selling on any approach to 1.75% seems a more sensible way to make money than simply to trust in market beta," he said.