Don't give up on gilts

There has been a lot of talk of government bonds being a bubble about to burst. But that may not be the case. If stock markets continue their slide - as they probably will do - the gilt market should go higher still.

It isn't surprising that the Fed has left rates unchanged at the 0 - 0.25% range, the ECB eased by 0.5% to 2% and the Bank of England is expected to ease again when the Monetary Policy Committee next meet. All interest rate roads lead to zero.

Although it is reported that the markets are scared of huge bond issuance, nonetheless, we are not sure that the willingness of governments to create money and borrow endlessly is the whole story because, when all is said and done, it's also about demand. The majority of analysts say that government bonds are a bubble, and well they might be. However, the same people who say that, strangely didn't think the property market was a bubble nor did they think the stock market was a bubble so their bubble-detection skills are flawed.

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