Leaviss on bonds after Brexit: Long-term value does exist in the sector

UK government bonds are appealing

The main headlines following Brexit have included the sharp fall in sterling, which is unsurprising given that markets had been increasingly expecting a ‘remain' outcome as the vote neared. Instead, investors are now left weighing the implications of a UK exit from the EU, with most economists expecting reduced economic growth, writes Jim Leaviss, manager of the M&G Global Macro Bond fund.

With the global growth outlook also now likely to be weaker, the US Federal Reserve is likely to be on hold with regards to further monetary tightening, with no interest rate hikes for the foreseeable future. Back in the UK, the inflation outlook has also potentially changed. A fall of the magnitude seen in the pound should lead to higher import prices. In turn, after years of inflation being below target, the UK's inflation rate could move higher. In the bond markets, US treasuries have been one of the main winners against this backdrop. German government bonds have also been in demand,...