Do Gilts Have a Place in Your Portfolio?

Although UK gilts yields look to remain low in 2017, the lack of income should not put investors off, say leading fund managers

Karen Kwok 25 January, 2017 | 4:31PM
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UK government bond yields hit a record low in August last year as worries over the nation’s economy rose following the Brexit vote. The 10-year gilt yield has climbed to 1.4% today, a significant improvement from the low last summer of 0.5%. But so too has inflation, with the latest CPI at 1.6% – leaving gilt investors with a negative real rate of return.

Frustrated investors tempted to abandon gits should hold on however, according to fund managers.

“We are positive on gilts for the next 12 months. I expect yields will be slightly lower than they are now,” said David Zahn, head of European fixed income for Franklin Templeton.

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Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk