While markets have wobbled over UK government bonds this year, personal investors have been happy to snap up gilts.
On this episode of the Investing Show, Tom Becket, co-chief investment officer at Canaccord Wealth, discusses with to Simon Lambert why individual investors are keen to turn Chancellor Rachel Reeves’ bond market misfortune into an opportunity.
He explains how the government bond market works, why the UK has been suffering, how investors can buy gilts, why duration, maturity and price matter – and what they should consider on inflation before they invest.
Investment platforms report a surge in interest from investors directly buying UK government bonds, rather than doing so through investment funds, with both long-dated 30-year gilts and those almost at maturity proving popular.
Investors are buying the former to lock into high interest rates, with 30-year gilt yields peaking above 5.7 per cent a fortnight ago (they currently trade at just below 5.5 per cent).
While they are investing in the latter to make a short-term capital gains tax-free profit from low-yield bonds trading well below face value, if held to maturity.
Tom discusses the prospects for both long, medium and short-term government bonds and explains why investors have been rushing to bonds paying as little as 0.125 per cent thanks to near-guaranteed tax-free profits.
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