Stock or bonds? Why buying the equity isn't always the answer

The number of stocks in the FTSE All Share yielding more than 10-year UK government debt reached a record high this year, but managers have still been able to find relative value in fixed income.

With benchmark gilt yields plumbing new depths of below 1.4% at the end of January, almost 80% of All Share stocks yielded more than gilts as of that date, according to analysts at Redburn. Given European sovereign bond yields have also plunged due to the European Central Bank's quantitative easing programme, a similar story is likely to have taken place on the continent. With European equities still trading at a discount to their UK peers, continental fixed income managers could be forgiven for following the lead of M&G bond manager Richard Woolnough, who bought equities for his Opti...