MPC sparks demand for gilts with QE2 signal

Managers have been buying gilts in the view interest rates will stay lower for longer as the MPC revealed last week it considered a second round of QE in its June meeting.

In the multi-asset sector, Fidelity’s Trevor Greetham and Barings’ Percival Stanion have added to gilts in recent weeks, while Jupiter bond expert Ariel Bezalel, and RWC Partners’ Peter Allwright, are avoiding high yield in favour of government bonds. Although the MPC held interest rates at 0.5% this month and left QE untouched, some members said “further asset purchases might become warranted if the downside risks to medium-term inflation materialised”. This caused five-year gilt yields to drop 9 basis points to 1.88% on Wednesday as investors began to focus on the possibility of mor...