gilts

International investors are buying record amounts of UK government bonds as the Bank of England's £75bn QE programme spurs demand, with the yield on the 10-year gilt hitting a new record low.

2011 has been a year when some of the most popular emerging market managers paid the price for the breakneck growth of recent years, with investors fleeing to safe havens as equities tanked amid the eurozone debt crisis.

Gilt yields hit a new record low by mid-afternoon as investors continued to buy up UK debt amid concerns the European Union has not done enough to avert a financial meltdown.

The Bank of England has overestimated the impact of quantitative easing on gilt yields, the Bank for International Settlements (BIS) has said.

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.

The government has said it will not issue CPI-linked gilts in 2012-13, saying the move would not be cost effective and would involve "a number of risks".

The Office for Budget Responsibility has revised public sector net borrowing forecasts even as Chancellor George Osborne proclaims the effect of falling gilt yields.

Leading fund managers believe gilts now look like the next safe haven bond market to come under threat ahead of DMO sale this week.

The yield on German bunds has risen above UK gilts for the first time since 2009 after Japan shifted out of bunds overnight following Germany's disastrous debt auction.

So suddenly no-one wants to lend to Germany for the next ten years - hardly surprising because by lending to Germany investors are effectively lending money to Greece, Portugal and even Italy.