Bond investors abandon UK debt in favour of Australia
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The news: Multi-asset fund managers are selling UK government bonds and buying debt issued by Australia and other Commonwealth countries instead, according to Morningstar data cited by Bloomberg.
The context: Investors have grown concerned about the UK’s political instability, weak fiscal management and rising energy prices, which could keep inflation and interest rates higher for longer.
The yield on the 10-year UK gilt has risen above 5% several times in recent months and is more than 50 basis points higher than six months ago.
Fund managers including Invesco and Rathbones Asset Management are reducing their holdings of UK government debt in favour of safer German bonds or higher-yielding debt from Australia, New Zealand and Canada, Bloomberg reported.
Morningstar’s data showed multi-asset funds increased their overall allocation to bonds over the six months to June, but the share of gilts within their fixed-income holdings fell from 25% to 15%.
What they said: John Stopford, head of multi-asset income at Ninety One UK, told Bloomberg he had invested in a mix of short-dated Australian government bonds and state government bonds after selling gilts.
The source: Bloomberg
