Figures out earlier this week revealed that the yield on benchmark ten-year UK bonds dipped as low as 1.738 percent during trading this week, before rising again to 1.77 percent – with a lower yield representing a greater demand among investors.
It is believed that that UK has benefited from a “flight of safety” amongst investors who have been increasingly reluctant to buy sovereign debt in countries, considered to be in the greatest financial trouble, including Portugal, Spain, Italy and Greece.
Along with benefiting from a “flight of safety” it is believed that the fall in borrowing reflects a signal from the Bank of England, that it is ready to restart its £325 billion quantitative easing programme later in the summer; providing a guaranteed buyer of bonds.
The UK aren’t the only ones to have benefited, with Germany experiencing a similar fall, as their ten-year gilts fell to a record low of 1.35 percent, before rising to 1.39 percent; although analysts have said that the yield on German bonds could fall to 1.30 percent, if the markets continue to be volatile.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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