Bond investments should not be affected by inflationary pressures, analyst claims

Thu, 08 Feb 2007

Bondholders have been reassured about the possible impact of inflation upon their yields by a financing analyst.

Consumer prices index inflation currently stands at three per cent, which represents the highest level since the Bank of England took over responsibility for setting the base rate in 1997.

However, Alex Veys, fixed-income portfolio manager at investments management group Fidelity International, has told people with bond investments that they should not be unduly concerned by this fact.

"Bond investors should not be alarmed by this red herring," he said.

"Bond yields are driven less by the current rate of inflation and more with where nominal growth is going over the next few years."

He added that investments specialists should not be tempted by 30-year inflation-linked bonds because returns could be significantly affected if inflation increased over the next three decades.

In addition to Fidelity International, there are a number of other high-profile investments specialists operating in the UK.

For instance, F&C Asset Management and Jupiter Asset Management both aim to provide strong returns on investments for their UK-based clients.

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