Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

THOUGHTS ON THE GILT MARKET

  • Comment
Reports that Tim Congdon, one of the 'six wise people' advising the chancellor, had recommended a full one-point ri...
Reports that Tim Congdon, one of the 'six wise people' advising the chancellor, had recommended a full one-point rise in interest rates from their current level of 5.75% to 6.75% impacted negatively on market sentiment in the latter part of the week.

It did not help that economic data published during the week pointed to a strengthening economy, suggesting Mr Tim Congdon's remarks were not completely without foundation.

M4 money supply continues to grow above its target range while the number of people unemployed is now falling quite sharply. Average earnings growth, at 4%, is ticking up, while the oil price, currently at levels not seen since the Gulf War, risks reversing the downward trend in producer price inflation since the beginning of the year.

All these indicators suggest that growth continues to accelerate and that a rise in inflationary pressures cannot be far around the corner, an eventuality making gilts a less attractive investment.

However, these signals acting to push gilt prices down, and their yields higher, should continue to be offset by the convergence of high yielding peripheral European bond markets, including the UK, with those of core Europe, in the run up to European Monetary Union.
  • Comment

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions.

Links may be included in your comments but HTML is not permitted.