Long dated Gilts’ performance beat all global assets

Even after seven years of securities purchase by central banks around the world, bonds remain the kings of the market and this year long-dated UK sovereign bonds are the king of the kings. While United States benchmark, S&P 500 has returned less than 9 percent, long-dated 30-year gilt has returned close to 35 percent. Any assets that come close are long dated bund and sterling corporate bonds with maturities above 15 years; both with slightly less than 30 percent YTD return.

Among the stock markets, MSCI emerging markets index is the one that comes close but that with half the return that of 30-year gilts. Gold has returned around 25 percent.

The large chunk of the outperformance came after the June referendum vote that has the potential to take the UK out of the European Union. This month the bank of England (BoE) has launched a comprehensive package of easing that includes 25 basis points rate cut and would lead to a £170 billion increase in the size of the balance sheet. The outperformance is likely to continue as speculations are rising for another rate cut by the central bank.