Advisers embrace the mantra about investing being for the long term, about diversification. Indeed, readers will certainly know all the good things about advised investment solutions.
However whether clients are heavily tilted to government bonds or not, there are broader economic and indeed fiscal concerns.
So, we are going to look at several links regarding the furore around gilts and sterling.
The coverage has been a mixture of excellent and execrable.
I’ll not give my view. You, dear reader, can make up your own minds.
This is Yahoo! Finance’s take. “Chancellor of the Exchequer Rachel Reeves’s deputy Darren Jones said the gilt market is functioning as normal and underlying demand for UK debt is strong, as pressure grows on the British government amid a rise in borrowing costs and wider market selloff.”
There are some quite odd characteristics to what has happened. Among other things, sterling had been – apparently – a hedge in currency markets which have now lost faith in the hedge amid widening gilt yields and US jobs’ strength as Business Life reports. (Business Life news is powered by City AM).
That feels like a trading strategy that has gone wrong. The problem – it seems to me – is that it leaves the fragility of the UK economically and fiscally more salient. In other words, the immediate trigger has little to do with subsequent jitters. The trigger may almost be irrelevant if it brings greater focus on the fundamentals.
Morningstar gives a very methodical assessment here. But we pull out one slightly grim quote regarding the focus on the UK.
Kathleen Brooks, research director at XTB, says that this could be potentially more serious for the UK, even though the country has a lower deficit than the US and France.
“The UK is looking like an outlier and is in the sights of the bond vigilantes,” she says. “It feels like the UK is in a tricky spot, and with UK [inflation data] set to be released next week, the focus on the UK bond market could continue for some time.
“Other countries have their fiscal issues, but the UK is potentially on the cusp of another fiscal crisis, without either 1) intervention from the BOE, or 2) government action to either raise tax or cut spending. Neither of these are attractive options when the economy is stagnating.”
This from Reuters may be a worry, given some pension funds are having to face cash calls around LLDI, but pension investment consultants are seeking to bring reassurance.
(There will surely be questions about resilience modelling from The Pensions Regulator and how much scrutiny was put on pension funds' LLDI liability.)
The Telegraph asks and answers Why Chancellor Rachel Reeves ‘fled to China’ as bond markets fell into crisis. The story is based on comments from the usually very sensible Conservative MP and shadow Treasury spokeswoman Harriett Baldwin.
In truth, this reviewer suggests that this might have signalled panic and even led to speculation about a market intervention.
Yields of close to 5% make gilts more attractive, reports Citywire New Model Adviser. Fill your boots!
In other news, the administrators of the collapsed PSG Sipp have completed the sale of Unity Sipp business to Pathlines Pensions, reported in Money Marketing.
Unity Sipp acted as scheme administrator operating around 5,500 Sipps with a total investment value of £1.2bn.
It does feel as if assets have moved around in what must have been a concerning few years for customers. And that kind of story has sometimes tended to repeat across the Sipp market.
Hopefully this sale is some kind of financial closure.
This is an intriguing and useful report from Just, reported in FTAdviser, which looks at benefits each year.
The company’s15th annual state benefits insight report found 79 per cent failed to claim any of the benefits they were eligible to receive in 2024, missing out on an average of £1,807 a year extra income.
While almost one in 10 who were claiming were receiving too little, on average missing out on an additional £2,915 a year income. Very significant sums for these groups.
Bank of England deputy governor Sarah Breeden has argued that recent developments in the UK economy support a gradual approach towards reducing monetary policy restrictiveness, as Investment Week reports.
Haydn Barlow is chartered financial planner at Equilibrium Financial Planning discusses using a partner’s pension as a financial planning tool in Money Marketing. All very helpful stuff though, of course, we have to remember marriages do not always last forever, sadly.
I do think that we need to consider that not all marriages last forever of course even late ones or the long ones.
