Interest rate rise set to diminish bond returns

With further rate rises expected following the 25 basis point hike earlier this month, index-linked ...

With further rate rises expected following the 25 basis point hike earlier this month, index-linked bond fund managers are not expecting returns to be as good as last year. The UK"s interest rate rise has been widely seen by economists as an attempt to choke off consumer demand and reduce the rate of increase in house prices in the future rather than lower the current rate of inflation, which is still below the Government"s new 2% target. These fears of house price inflation led to a 2.1% UK Government All-Stocks Gilt index total return in 2003, which was less than cash, while the UK Gove...