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What the changing dynamics of inflation could mean for UK bond markets

UK inflation may have cooled more than expected, but the headline figures mask a deeper challenge. Supply-side shocks are now the dominant force shaping growth and prices, keeping inflation stubbornly above target. With the UK yield curve appearing too flat for this backdrop, AJ Bell’s James Flintoft says investors should stay alert to the implications for bond allocations and diversification. James Flintoft, head of investment solutions at AJ B…

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Wealth DFM

AJ Bell: What the changing dynamics of inflation could mean for UK bond markets

While a softer inflation print gives the market some breathing space, it doesn’t erase the structural inflation story. Inflation is still nearly double the Bank of England’s target of 2% and service sector inflation is sticky. There needs to be big improvements before we can say we’re back on the path to 2% and that long dated gilt pricing is justified. The gilt curve still looks stretched given the broader backdrop. As the Bank of England gover…

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