A testing time for fixed interest in UK

The start of 2006 has been a testing time for fixed interest in the UK. In January we witnessed a ne...

The start of 2006 has been a testing time for fixed interest in the UK. In January we witnessed a near breakdown in index-linked gilts when the 50-year index-linked gilt (1.25%, 2055) saw its real yield touch a record low of 0.38% before recovering. This event typified the major price distortions existing in the long end of the gilt market. Can a real annual return of 0.5% over half a century be called attractive? Ever since FRS17 put pension fund liabilities onto the balance sheet, pension fund managers have hastened to match their liabilities by buying long bonds, apparently heedless of ...