Chief investment officer at JP Morgan says ‘UK bonds should not fear Brexit’

Holders of UK’s government gilts or bonds need not fear the prospect of Britain voting to leave the EU as they stand to benefit from any economic woes that follow the vote, according to one of the world’s largest money managers.

Chief investment officer at JP Morgan says ‘UK bonds should not fear Brexit’

“If a Brexit happened it would be very likely the Bank of England would ease policy again, either by cutting interest rates or more quantitative easing, gilts are very much a beneficiary of that,” Nicholas Gartside, London-based chief investment officer for fixed-income at JP Morgan Asset Management, said.

“You also have a scenario where you’ve got a lot more economic uncertainty. So, again, gilts are a beneficiary of that,” he said.

Gilts extended a rally yesterday that delivered the second-biggest returns among developed nations this year.

The pound meanwhile has taken the brunt of investor uneasiness about the possibility of Britain exiting the world’s largest trading bloc following the June 23 vote, with its 4% fall against the dollar this year the worst among 16 major currencies.

The 10-year gilt yield dropped two basis points to 1.47% at one stage yesterday.

A UK exit is far from certain, with polls showing the outcome is hard to call.

Bank of England officials, including governor Mark Carney, will testify at Parliament’s treasury committee today on the economic and financial costs and benefits of EU membership.

“Gilt yields head probably through 1%” after a UK exit, Mr Gartside said.

“We look at the polls at the moment, it’s arguably a narrow majority for the “In” camp, and one thing we’ll follow is the polls very very closely.

"The second point is it does feel a long way away until June 23. We’re in the phony war stage really, I suspect as we get a lot closer to the 23rd the debate will intensify.

"What investors should prepare for is a lot more volatility,” he said.

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