UK gilt markets following budget announcement

Published  03 March 2021
   4 min read

Following the Chancellor’s budget, Ben Nicholl, fixed income fund manager at Royal London Asset Management (RLAM), comments on the outlook for the UK gilt market:

“The key focus for the UK Gilt market was on just how high government borrowing would be; the answer being significantly above consensus expectations. The immediate market reaction should be to see yields move higher, however the market already has an optimistic view of the UK recovery priced in.

“As the Chancellor stated, higher yields increase the cost of servicing debt. It will be interesting to see what the Monetary Policy Committee (MPC) make of ever tightening financial conditions. As for index linked bonds, they may outperform nominal bonds initially due to lower than expected issuance, but UK inflation expectations are already very high when you take the transition from RPI (Retail Price Index) to CPIH (Consumer Price Inflation including Occupiers’ Housing Costs) into account.”

About Royal London Asset Management (RLAM):

Established in 1988, Royal London Asset Management (RLAM) is one of the UK's leading fund management companies, providing investment management solutions to both wholesale and institutional clients such as not-for-profit organisations, local authorities and the insurance sector.

RLAM manages £164 billion of assets and employs 129 investment professionals as at 31 December 2021. It invests in all major asset classes including UK and overseas equities, government bonds, investment grade and high yield corporate bonds, property and cash.

For professional clients only, not suitable for retail investors.

Issued by Royal London Asset Management Limited, registered in England and Wales number 2244297; authorised and regulated by the Financial Conduct Authority. Registered Office: 55 Gracechurch Street, London, EC3V 0RL.

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