Rate hike fears prompt shift into high yield

Fixed income managers prepare for sharp increases in UK interest rates over longer term, with move towards high-yield and floating-rate instruments

Fixed income managers have shifted towards high-yield and floating-rate instruments on concerns of hikes in UK interest rates this year. They stand ready for sharp increases over the longer term, but doubt a prediction from Barclays Capital last week that UK rates could hit 6.5% in 2015. The average prediction from 16 managers polled by Investment Week suggests UK base rates will be 1.3% in December, and inflation 1.7% – benign compared to 0.5% and 2.9% now. Howard Cunningham, manager of Newton Investment Management’s International Bond fund, warns of a danger of rates rising drama...