Robin's Round-Up of Financial Data for May 2009

Redemption yields on short-dated gilts imply interest rates will start rising in the next 12 months and continue to rise quite rapidly thereafter. The inference is the need to curb inflationary pressures from a recovering economy. Historically shares recover before the end of a recession, on receiving the first set of reliable data that the end is coming. Over the next 12 months or so we may therefore see an upturn in the share market, followed by an increase in interest rates and inflation, and the bottoming out of the residential property market. RPI has dropped to –0.40% and CPI has reduced a little. We expect CPI to decline and RPI to go further negative over the next 6 months, and then for that position to start reversing. Redemption yields on long dated gilts have risen over the last month, but still remain low which is due to quantitative easing, and is bad news for potential annuitants. Long dated gilt yields should pick up strongly over the next few years as HM Government increases gilt issuance to pay for the economic stimulus package. Fund manager house views currently favour UK fixed interest (particularly corporate bonds), UK shares, American shares & Pacific shares.

 

Bank of England base rate of interest							0.50% pa
Short dated gilts (redemption yields)		8.00% Treasury Stock 2009 redeeming 25-09-2009					0.71% pa
		6.25% Treasury Stock 2010 redeeming 25-11-2010					0.81% pa
		3.25% Treasury Gilt 2011 redeeming 07-12-2011					1.69% pa
		9.00% Treasury Stock 2012 redeeming 06-08-2012					2.20% pa
Long dated gilts (red yields)		5.00% Treasury Stock 2025 redeeming 07-03-2025					4.21% pa
London Inter-Bank Offered Rate		LIBOR 1 WEEK					0.53% pa
		LIBOR 1 MONTH					0.55% pa
		LIBOR 3 MONTHS					0.62% pa
		LIBOR 6 MONTHS					0.66% pa
		LIBOR 12 MONTHS					0.83% pa
Consumer Price Inflation (CPI)							2.90% pa
Retail Prices Index (RPI)							-0.40% pa
National Savings & Investments		3 Yr Index-Linked Savings Certs offering RPI +					1.00% pa
		5 Yr Index-Linked Savings Certs offering RPI +					1.00% pa
Exchange Rates		£1.00 buys:		€1.12			$1.49
Fund Managers – Current House Views on Different Asset Classes
Asset Class	Positive	Slightly Positive	Neutral		Slightly Negative	Negative		Total Views Offered
Cash			1			1		2
Property					2	2		4
UK Fixed Interest	3	1				1		5
Overseas Fixed Interest					1			1
UK shares	2	1	1			1		5
European shares		2			1	2		5
American shares	2		2			1		5
Japanese shares		1	1		1	2		5
Pacific (ex Japan) shares	1	2	1		1			5

 

Data gathered on 1 May 2009. All figures given to 2 decimal places. Participating fund managers: Threadneedle, UBS, Gartmore, F&C, Schroders.   DISCLAIMER Please note, whilst every effort has been made to ensure the information contained in this document is correct, sometimes the information given to us by third parties is inaccurate. We cannot therefore be held responsible for the accuracy of this information and it should not be relied upon for making any decisions.