Strong buying of government debt by the UK's banking sector is needed to prevent a rise in gilt yields as overseas demand wanes, says Simon Ward, the chief economist at Henderson Global Investors.
Government bond markets are continuing to sell off strongly this morning as investors absorb the extra $1trn of debt added to the US balance sheet by the extension of its tax cuts.
Gilt yields have spiked following the Bank of England's inflation report, which suggested the UK will see higher inflation in the near-term.
The Federal Reserve is set to embark on a programme of measured quantitative easing next week, avoiding the ‘shock and awe' system used during the financial crisis.
Gilt yields have spiked strongly today after the UK recorded twice the expected growth in the third quarter.
The new so-called 'currency vigilantes' hit sterling hard yesterday, on a day when gilt yields dropped to a new record low.
Pimco's Mike Amey believes Chancellor George Osborne must stick to his reduction plans outlined in the Budget despite fears the cuts could derail UK growth.
International investors are buying record amounts of gilts on expectations of further Bank of England quantitative easing.