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Gilt yields fall to new record low

Nick Paler
Written By:
Nick Paler

The yield on UK gilts has fallen to a new record low during trading today, as demand for safe havens picks up once again following indecision from the Fed over expanding its stimulus programme.

By 11:50am, the bid yield on benchmark 10-year gilts fell to 1.518%, through the previous low of 1.524% set in April.

Yields were down 0.053% on the day, according to Thomson Reuters data, mimicking falls seen in US treasuries following a record auction for the country’s debt.

The yield on 10-year US treasuries is also lower today, down at 1.488%, following its $21bn auction yesterday which attracted record interest.

Gilt yields have plunged over the last year, falling from near 3%, as investors snap up bonds despite the headwinds facing both the UK and US economies.

Huge debt piles in both countries, and a lower yield than inflation, have failed to discourage investors who remain panicked about the outlook for the global economy.

The UK has benefited in particular because the country has managed to retain its AAA-status, while US treasuries are outperforming because of the country’s safe haven appeal despite the loss of its AAA rating.

Gilt funds remain one of the best performers over the last year as a result, with the average fund in the IMA UK Gilts sector returning 15% to investors.

The key call for investors has been when to sell out of gilts, but with inflation falling, and the safe havens continuing to shine, buyers continue to outweigh sellers.

Recent data also showed gilt outflows in Q1 were reversed in Q2, as investors flocked back to the safe haven asset class.