Non-gilts' glory days appear to be numbered

John Birdwood, Barings

Bonds may have fared better than equities, given the recent bear market, but there are now compelling reasons to sell

It has been a remarkable 10 years for the non-gilt sterling debt markets, but it is difficult to see this performance persisting. In 1996, non-gilts were worth 27% of the gilt market. By the end of 2003, this was 123%. There has been a sea change in the way long-term finance operates in the UK. Non-gilts have performed better than their equity counterparts, given the recent bear market, but there are some compelling reasons to sell. Moody's data up to 2002 shows the annual average change in AAA bonds. Portfolios start with 100% invested in AAA bonds, but within a year just 88% are AA...