The deflation menace
Article Abstract:
Yields for United Kingdom government securities (gilts) have dropped, and this has led to a drop in annuity rates. The spread between index-linked gilts and ordinary gilts has narrowed, and this is linked to a drop in expected inflation. Pensioners who have bought index-linked annuities are worse off if inflation is zero. Gilt yields have dropped partly because of inflation, and gilt prices have risen because gilts are seen as a safe investment at a time of uncertainty. A reduction in real yields could be temporary, but there is no certainty that this is the case.
Publication Name: Investors Chronicle
Subject: Business
ISSN: 0261-3115
Year: 1998
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Index-linked records broken
Article Abstract:
Index-linked United Kingdom government securities (gilts) have seen yields drop to under 2.5%, the lowest level since 1981 when they were launched for the first time. Pension funds have moved away from equities into conventional and index-linked gilts. Few index-linked gilts have been issued, and strong demand combined with weak supply means that the price has risen. Expectations that the UK will join European monetary union, and that UK interest rates will consequently drop have also affected yields.
Publication Name: Investors Chronicle
Subject: Business
ISSN: 0261-3115
Year: 1998
User Contributions:
Comment about this article or add new information about this topic:
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