SECTOR PROFILE
Performance of funds vs sectors
Name 1yr (%) 3yr (%) 5yr (%) 10yr (%)
Royal London UK Government Bond |
-20.6 |
-19.9 |
-11.4 |
3.1 |
Allianz Gilt Yield |
-23.4 |
-22.9 |
-13.8 |
1.6 |
IA UK Gilts |
-22.1 |
-21.7 |
-12.4 |
5.4 |
Vanguard UK Inflation-Linked Gilt Index |
-33.6 |
-26.2 |
-16.7 |
27.2 |
IA UK Index Linked Gilts |
-34.3 |
-24.8 |
-16.2 |
26.5 |
Source : FE Analytics
the asset price has been dictated more acutely by duration .” Dishner adds that the poor performance of index-linked gilts in 2022 so far can be partly explained by the fact they were already priced for high inflation . “ Ten-year breakevens were around 4 % to start the year ,” he says . “ So , while near-term inflation has been higher , the market is taking the view that some combination of 1 ) central bank policy , 2 ) slower growth , and / or 3 ) energy issues will be resolved in the medium term . This can be seen in the relative outperformance of two-year index-linked bonds versus 10-year linked ones .”
Darkest before dawn ? The UK is not the only developed market to suffer : Rush notes global government bonds have only fallen further in three years since 1701 . “ The speed at which these movements have taken place shows how seriously bond investors have taken changing inflation expectations ,” he says . While this may make for depressing reading , Rush notes these assets are now trading at yields that make them more attractive to investors in an environment of persistent inflation . “ We believe they will remain higher for longer , though outside of the double-digit inflation figures we have seen this year ,” he says .
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