Flight to safety looks set to continue

The ongoing volatility in the equity market and low inflation environment means investors are likely to continue to prefer corporate bonds to equities

There has undoubtedly been a shift in investors' risk profiles over the last three years, a period that has encompassed the bursting of the dot.com bubble, 11 September, a stuttering global economy, accounting scandals, the threat or war and unprecedented levels of corporate downgrades. Against this turbulent background, it is little wonder a flight to quality has ensued and that government paper has been the main focus of investors' attention. However, during times of risk aversion it is not unusual for investors to act irrationally. After a six-month period during which gilts have ...