Ward: Gilts are not pricing in Japanese-style deflation

Henderson chief economist Simon Ward has said the sharp fall in gilt yields does not indicate the UK is headed for a Japan-style deflationary environment.

Yields on 10-year gilts plunged below the 2.4% mark for the first time in the modern era last week and continue to hover around such levels. While some argued falls in yields signal the UK is being seen as a safe haven by harried investors, others said gilt yields are flagging deflation fears. A similar move was seen in Japan when government bond yields dropped in anticipation of a sustained decline in prices, prompting investors to fear the onset of deflation in the UK. However, Ward said gilt yields have been driven down by lower real interest rates rather than falling inflation ...