| Redemption yields on short-dated gilts imply that interest rates will stay low at 0.5% or thereabouts for the rest of 2010 as our fragile economy continues to struggle out of recession. Thereafter interest rates may start rising and continue to rise quite rapidly thereafter. Over the next 12 months or so we may therefore see only modest growth in the share market with continuing volatility, and the early stages of a recovery in the residential property market. We continue to think commercial property is turning around and offers potential for positive future returns. RPI has risen further to 5.30% and CPI has to 3.70%, however they are expected to fall back again. Redemption yields on long dated gilts have dropped a little to 4%, and remain low due to the ongoing demand to secure liabilities such as final salary scheme closures, With Profit fund closures etc which is bad news for potential annuitants. We think long dated gilt yields may pick up over the next few years as HM Government continues to issue gilts to pay for the economic stimulus package, but future final salary scheme closures may temper that. Fund manager house views are again very mixed, broadly in favour of Commercial Property, Overseas Fixed Interest and shares in the UK, America and Pacific (ex Japan). An ongoing concern is national debt, our newly elected Chancellor and finance ministers across Europe must persuade investors that national debt is being brought under control. |
Bank of England base rate of interest | 0.50% pa | |||||||
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| Short dated gilts (redemption yields) | 6.25% Treasury Stock 2010 redeeming 25-11-2010 | 0.47% pa | ||||||
| 3.25% Treasury Gilt 2011 redeeming 07-12-2011 | 0.78% pa | |||||||
| 9.00% Treasury Stock 2012 redeeming 06-08-2012 | 1.19% pa | |||||||
| 8.00% Treasury Stock 2013 redeeming 27-09-2013 | 1.57% pa | |||||||
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| Long dated gilts (red yields) | 5.00% Treasury Stock 2025 redeeming 07-03-2025 | 4.06% pa | ||||||
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London Inter-Bank Offered Rate | LIBOR 1 MONTH | 0.56% pa | ||||||
| LIBOR 3 MONTHS | 0.66% pa | |||||||
| LIBOR 6 MONTHS | 0.91% pa | |||||||
| LIBOR 12 MONTHS | 1.36% pa | |||||||
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| Consumer Price Inflation (CPI) | 3.70% pa | |||||||
| Retail Prices Index (RPI) | 5.30% pa | |||||||
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National Savings & Investments | 3 Yr Index-Linked Savings Certs offering RPI + | 1.00% pa | ||||||
| | 5 Yr Index-Linked Savings Certs offering RPI + | 1.00% pa | ||||||
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| Exchange Rates | £1.00 buys: | €1.20 | $1.47 | |||||
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Fund Managers – Current House Views on Different Asset Classes | ||||||||
Asset Class | Positive | Slightly Positive | Neutral | Slightly Negative | Negative | Total Views Offered | ||
| Cash | | | | | 3 | 3 | ||
| Property | 2 | | 1 | 2 | | 5 | ||
| UK Fixed Interest | 1 | 1 | 2 | 1 | 1 | 6 | ||
| Overseas Fixed Interest | 2 | | 2 | 1 | | 5 | ||
| UK shares | 2 | 1 | 2 | | 1 | 6 | ||
| European shares | | | 2 | 2 | 2 | 6 | ||
| American shares | 2 | 1 | 2 | | 1 | 6 | ||
| Japanese shares | 1 | 2 | | 1 | 2 | 6 | ||
| Pacific (ex Japan) shares | 2 | 2 | 2 | | | 6 | ||
| Data gathered on 01 June 2010. All figures given to 2 decimal places. Participating fund managers: UBS, Canada Life, Threadneedle, F&C, Aegon, Standard Life. DISCLAIMER Please note, whilst every effort has been made to ensure the information contained in this document is correct, sometimes the information given to us by third parties is inaccurate. We cannot therefore be held responsible for the accuracy of this information and it should not be relied upon for making any decisions. |
