Slowdown fuels exceptional returns

Fund manager's comment

Bonds are very much back in fashion, in a turnaround from a year ago. In August 2004, interest rates...

Bonds are very much back in fashion, in a turnaround from a year ago. In August 2004, interest rates were expected to climb to at least 5.5% by the end of 2005. As it has turned out, the market was wrong-footed, and a year later rates have dropped to 4.5%. Since the last rate rise 12 months ago, UK government bonds have returned approximately 10%, which is an incredible achievement when you consider that gilts are considered a low-risk investment. Long dated gilts, which are more sensitive to inflation and interest rates, have done even better. These exceptional returns stem from a susta...