Making money: what the experts think
Gilts glisten
According to the latest data, sterling was “the world’s worst performing currency” in October, trailing behind 150 others, said Natasha Clark in City AM. But the month’s 6% plunge – the second-largest drop this year, after June – may not affect the confidence of foreign investors. “If the value of a currency falls, it’s rather like the country’s stock price is falling,” remarked WPP’S Sir Martin Sorrell earlier this week. Yet the latest data from the Bank of England shows that overseas holdings of UK Government bonds (gilts) “climbed by a hefty £13.3bn in September, after a modest rise of £1.8bn in August”, said Alex Brummer in the Daily Mail. “If UK plc has become such a basket case, then why is growth firmer than most G7 nations”, and “why are foreigners rushing to London” to buy gilts?
Europe encore
What does seem evident is that concerns in the bond market are “gradually shifting back to eurozone debt and the continuing travails of the southern states”, said Ambrose Evans-pritchard in The Daily Telegraph. Investors are bracing themselves for a likely “No” vote in next month’s crucial constitutional referendum in Italy, which may lead to the collapse of Matteo Renzi’s government. Italian 10-year bond yields (which move inversely to prices) are already at a one-year high. That could be just the start. “The markets are too complacent,” according to Morgan Stanley’s Daniele Antonucci. “We think Italian bonds and European equities generally underprice the risk of the Italian referendum.”
Diamond dog
The Premium Bond celebrates its 60th anniversary this week, said Naomi Rovnick in FT Money – and it’s not looking too bad for its age. Some 21 million savers hold a total of more than £63bn in Premium Bonds, lured by the two million tax-free cash prizes paid out each month (including two £1m jackpots). The bonds offer “a prize rate” – an average payout, something like an interest rate – of 1.25% a month. Given that cash Isa rates now average 0.74%, “that’s not such a bad deal” for savers, though as Danny Cox of Hargreaves Lansdown points out, the big “downside of Premium Bonds is that there is no guarantee of winning anything at all”.