Bond managers cut duration to record lows ahead of 'gilt yield spike'

Bond managers have cut duration to record lows, anticipating a fresh spike in gilt yields as they settle at a higher trading range.

Having reached a record low of 1.4% last summer, 10-year gilt yields moved back above 2% at the start of 2013 as fears of a eurozone breakup recede, and managers said the stage is now set for a further rise. M&G’s Richard Woolnough said an earlier than expected interest rate hike by the US Federal Reserve could put upward pressure on yields. He has reduced duration across his £18bn strategic and corporate bond portfolios to an all-time low of around six years, saying investors are not being adequately compensated for interest rate risk in the current environment. He suggested reduc...