- Signs of economic recovery have not raised Index-linked gilt yields yet.
- This reflects long-standing global factors such as the shortage of safe assets and weak economic growth.
The UK economy is recovering well. Since November real GDP has risen 3.5 per cent; the number of workers on payrolls has risen 1.5 per cent; and cyclical shares have soared.
One big asset class, however, doesn’t seem to have realised this – index-linked gilts. Yields on five-year linkers have actually fallen slightly since November and are still close to record levels. Which is odd, because an economic recovery should reduce demand for safe assets and so raise yields.