UK bond stars debate outlook for gilts in 2012

After a momentous year for government debt, during which it far outstripped the majority of asset classes, managers have moved to take profits from positions in several major debt markets.

Investors have cut exposure to bunds, treasuries and gilts across portfolios in the expectation of a pull back in prices and a rise in yields. But is 2012 really going to be so different to 2011 for gilts? At the start of this year, the Merrill Lynch Gilt index had a yield of 3.22%, while the European High Yield index paid investors 7.96%. It looked set to be a year to invest in high yield over gilts given the disparity, and many leading names made such a move. However, year to date the standout winner has been gilts, delivering a return of 13.5% as yields dropped sharply and price...