Cowley: Gilt yields will fall to 2% by Q2

OMAM head of fixed income Stewart Cowley believes gilt yields will plunge to 2% by the second quarter of next year but will more than double over the next 12 months.

He warns investors unprepared for such “incredible” swings will suffer severe losses, especially in long-dated issues. “There will be reputations won and lost in the next three years,” Cowley says. Cowley, who runs Omam’s Global Strategic Bond fund, says investor nervousness will fuel demand for bonds into next year. However, investors will start offloading holdings from Q3 2012 as they identify various dangers looming for global debt markets in 2013. Yields could then rally to 5% by the third quarter of 2013, the manager says. He says Japan will need to hike coupons on government ...