| Redemption yields on short-dated gilts imply that interest rates will stay low at 0.5% or thereabouts well into 2013 as our fragile economy continues to recover. Thereafter interest rates may start rising but not rapidly. Over the next 12 months or so we may see modest growth in the share market with continuing volatility. The outlook for rising unemployment and limitations on mortgage lending may however delay any recovery in the residential property market. RPI is at 5.20% and CPI 4.50%. Inflation may go higher still due to VAT increases and increasing fuel costs before perhaps declining again later this year. The redemption yield for long dated gilts stands at 2.84%, a drop of 0.5% over the last month. This figure is at a very low level indeed which is bad news for potential annuitants. This is due to the ongoing demand to secure liabilities such as final salary scheme closures and continuing low interest rates, against which gilts seem reasonable value and are currently in demand. We think long dated gilt yields will pick up over the next few years as interest rates rise and other asset classes become more favourable, however future final salary scheme closures and further quantitative easing may temper that. Fund manager house views favour Overseas Fixed Interest, and investments in UK, Japanese and Pacific (ex Japan) shares. An ongoing concern remains national debt, our Chancellor and finance ministers across Europe must continue to persuade investors 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) | 3.25% Treasury Gilt 2011 redeeming 07-12-2011 | 0.45% pa | ||||||
| 9.00% Treasury Stock 2012 redeeming 06-08-2012 | 0.67% pa | |||||||
| 8.00% Treasury Stock 2013 redeeming 27-09-2013 | 0.61% pa | |||||||
| 5.00% Treasury Stock 2014 redeeming 07-09-2014 | 0.76% pa | |||||||
|
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| Long dated gilts (red yields) | 4.25% Treasury Gilt 2027 redeeming 07-12-2027 | 2.84% pa | ||||||
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| London Inter-Bank Offered Rate
| LIBOR 1 MONTH | 0.55% pa | ||||||
| LIBOR 3 MONTHS | 0.55% pa | |||||||
| LIBOR 6 MONTHS | 0.56% pa | |||||||
| LIBOR 12 MONTHS | 0.58% pa | |||||||
|
| ||||||||
| Consumer Price Inflation (CPI) | 4.50% pa | |||||||
| Retail Prices Index (RPI) | 5.20% pa | |||||||
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National Savings & Investments | 3 Yr Index-Linked Savings Certs offering RPI + | Not in issue | ||||||
|
| 5 Yr Index-Linked Savings Certs offering RPI + | Not in issue | ||||||
|
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| Exchange Rates | £1.00 buys: | €1.17 | $1.54 | |||||
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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 | 1 |
| 2 | 1 |
| 4 | ||
| UK Fixed Interest |
|
| 2 | 1 | 2 | 5 | ||
| Overseas Fixed Interest | 2 |
| 2 |
|
| 4 | ||
| UK shares | 4 |
| 1 |
|
| 5 | ||
| European shares |
|
| 2 |
| 3 | 5 | ||
| American shares | 2 |
| 1 |
| 2 | 5 | ||
| Japanese shares | 3 |
| 2 |
|
| 5 | ||
| Pacific (ex Japan) shares | 4 |
| 1 |
|
| 5 | ||
| Data gathered on 3 October 2011. All figures given to 2 decimal places. Participating fund managers: Standard Life, Kames Capital, F&C, Threadneedle, Canada 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. |
