Low inflation may fuel demand from pensions

Yields could rise on government and corporate paper but overall the outlook is good for the asset cl...

Yields could rise on government and corporate paper but overall the outlook is good for the asset class, says Phil Roantree, manager of the New Star Sterling Bond fund. The downgrade of US insurance giant AIG from AAA status and car manufacturer GM from investment grade to sub added to the growth in leveraged company takeovers are all short-term negatives for corporate bond prices, in his eyes. At the same time, he believes gilts look expensive by historic standards. With gilts yielding 4.5% and inflation at 2.5% that leaves a real return of 2%, below the 2.3% a year produced by UK govern...