Redwood: Golden age for gilts coming to an end?

The UK's Office of Budget Responsibility (OBR) has recently published its new forecasts. Among them is one that deserves more attention than it has received to date.

The OBR says the yield on UK government bonds will go up from an average 3.8% this year to 4.9% in 2014-15. If inflation stays higher for longer, gilt yields could go up by even more. If the OBR is anywhere near right, a holder will lose more on the capital value of most bonds than he or she will enjoy in income from holding them. This will come as a shock after a decade when gilts have given decent returns and outperformed UK and US shares. Studying the form of various investment classes over longer time periods than just the past ten years shows you can live through a period of...