Britain revealed as meanest for real bond yields

Britain has become the global leader in the financial repression of government creditors, according to Enzo Puntillo, the head of fixed income at Swiss & Global.

Puntillo says high inflation has contributed to British government debt offering among the worst real yields in the world.

An analysis of real returns on two-year government bonds by Swiss & Global reveals that Britain is the front runner when it comes to suppressing inflation-adjusted returns on its debt. (article continues below)

Two-year gilts offer a negative return of approximately 4.2%, after inflation.

America offers the second worst returns, with 2.75%.

Britain’s consumer prices index (CPI) inflation rate was revealed to be 5.2% in September – well above the Bank of England’s 2% target. However, other countries have delivered a real return, despite rapid inflation. Brazilian inflation hit 7.3% in October – the highest level for six years – but still offers one of the best returns on its two-year paper, with a real yield of over 5%.

Alan Wilde, the head of fixed income and currency at Baring Asset Management, warned of “deeply negative” real returns to gilt investors on 10-year bonds in August, arguing that they are a consequence of low prospects for British economic growth.