Are index-linked bonds still a good investment?

The rise in bond yields during May and June has left few parts of the bond market unscathed, and UK bonds were very much part of this move.

The action was triggered by comments from the Federal Reserve that it would slow future bond purchases, and the interest rate on high quality bonds has risen by up to 1%. In the UK, the interest rate on nominal gilts has risen by between 0.5% and 0.75%, whereas the move in some parts of the index-linked market has been closer to a full 1%. Ironically, while the moves in our market have been at least comparable to those elsewhere, the Bank of England (BoE) under new governor Mark Carney has been at pains to highlight that in all likelihood official interest rates will remain unchanged fo...