UK gilt investors expect budget to pass without market drama, Morningstar says
TLT•Most of eight fixed-income funds surveyed by Morningstar expect finance minister John Healey to avoid stoking gilt market volatility in the October 28 budget. Most said gilts offered attractive value and held no significant overweight or underweight positions.
1. Funds expect calm budget
Most of the eight fixed-income funds surveyed by Morningstar expect a low-volatility budget and are not significantly overweight or underweight gilts. Royal London’s UK Government Bond Fund expects no major new spending, while Fidelity’s MoneyBuilder Corporate Bond Fund plans no meaningful change to its positioning.
2. Views on gilt exposure
Jupiter’s Strategic Bond Fund said it would be “very surprised” by substantial fiscal loosening and had shortened the maturity of its UK debt holdings earlier this year. Other funds described a wait-and-see approach, expected a mix of tax rises and reforms, or held limited UK duration exposure. Allianz’s Gilt Yield Fund was modestly long UK duration versus its benchmark and expected a cautious budget.
3. Market context
British bond yields are the highest among Group of Seven economies, largely reflecting expectations of higher Bank of England interest rates due to higher inflation rather than budget worries. Indicators of fiscal risk have shown little change in recent months, unlike in France.
