Why have bond yields stayed so low?

The widely expected rotation from bonds to equities has failed to appear and gilt yields have fallen this year. This is odd, says Newton's Paul Brain, as he argues that bond yields are likely to stay low for a good while yet.

Gilt yields 10-year gilt yields are around 2.65% (35 basis points lower than at the start of the year) and the UK equity market has fallen slightly; the expected ‘great rotation’ out of bonds and into equities has not yet materialised. This is odd, given the beginning of the year was full of optimism over economic growth and expectations of a change in direction of US and UK monetary policy. The Federal Open Market Committee confirmed that the trajectory of interest rates will be higher over the next two years as unemployment declines, undermining bond markets. Tighter moneta...