Gilts
“ The difficult thing will be to work out when the peak in the interest rate cycle will be , but once things stabilise , we think gilts can once again start to provide investors with a defensive cushion ”
Eduardo Sánchez Head of fixed income and absolute return research at Square Mile
heavy decline in 2022 may come as a surprise to anyone holding them to protect against rising prices . So what has gone wrong ? Chris Rush , investment manager at IBOSS , says that although indexlinked bonds provide a yield in line with inflation , this has been far outweighed by their duration and its impact on prices this year . “ The higher the duration , the more sensitive the asset price is to movements in interest rates ,” he explains . “ Index-linked bond indices have a duration of close to 21 years , versus a gilt index duration of 10 years . In short , though the interest rate rises are positive for the yield ,
Issue 89 - November 2022 / 59 /