Long term bond yields are likely to trade in a narrow range over the next few years amid a slowdown ...
Long term bond yields are likely to trade in a narrow range over the next few years amid a slowdown in growth.
Schroders believes the yield on 10 year gilts will trade in the range of 5-6% in the period to 2002 from their current level of around 5%.
The group pointed out Government debt is falling in importance as issuance dries up.
During 1999, the UK and US government markets both saw net repurchases while there was over £20bn of corporate bonds issued in the UK and over $400bn in the US.
Abdallah Nauphal, head of global fixed interest at the group, said: "The monetary cycle argues for a slowdown in growth. Inflation has picked up but if growth slows down, price increases will decelerate.
"The supply of private debt is now outpacing Government debt and has profound implications for the market. In the UK, the benchmark status of gilts is coming into question because of the lack of supply.
"Non-government bond supply in Europe will also continue to grow.
"Higher levels of start-ups plus mergers and acquisitions will also add to the development of the high yield market."