UK

Fixed income managers always want to have the flexibility to find the best value across their investment sphere and therefore need the capacity to buy bonds in different currencies.

Several times this year we have discussed the benefits of “roll down” in an environment that for fixed income investing is particularly unfriendly. We believe roll down gains will be one of the best ways to protect portfolios in 2018 from the rising rate curves that we have been experiencing so far.

Ever since the result of the Brexit referendum we have seen a premium on £ credit spreads, and we have thought it worthwhile trying to exploit this premium – in a measured way.

Our base case for rates markets is a gradual shift higher, but there are reasons to consider why even our forecast is too constructive and the move higher could be more substantial.

Yesterday, 10yr Gilts closed at 1.510%.  Whilst that individual yield level does not sound particularly significant, in a historical context it is possibly one of the most important month end closing levels I have witnessed in more than 25 years in the markets.