United Kingdom Yields

The degree of difficulty for the UK is unparalleled: a global Pandemic and the Brexit transition. The Pandemic hides some of the decline in foreign demand that the exit from the European Union will deliver. The inflation bonds tell the story succinctly: negative yields that exceed the average inflation rate of the last 40 years. The implication is stark: zero inflation and little growth for the foreseeable future.

  • The short-end of the curve should be negative when the 30-year yields are below 1%. One of them is incorrect and it's probably the short-end given the inflation bond yields are negative.

  • Yield curve valuation suggests short 30-year and long 2-year on a relative basis and highlights the prospect of negative nominal yields.

  • The negative yields on inflation bonds reflect their embedded protection against deflation and offer little benefit against inflation.


Disclaimer: All positions are suggestive of relative value and not intended as a recommendation or investment advice. Consult an investment advisor before implementing any investment strategy.

Los Angeles  |  San Francisco  |  213-459-3332  |   415-373-7152


©2003-2021 Capital Risk Management LLC. All rights reserved.


Capital Risk Management is a Registered Investment Advisor in California and may transact business there and in other states where it is notice filed or exempt.

Please note that although Capital Risk Management LLC is a Registered Investment Adviser, readers should be aware that registration with any state securities authority

does not imply a certain level of skill or training. Additional information about Capital Risk is available on the SEC’s website at www.adviserinfo.sec.gov or

through the Broker Check at FINRA.

Strategy | Investing | Asset Allocation | Liability Driven Investing | Pensions | Endowments | Enterprise Risk Management | Financial Planning | Wealth Management

Disclosures     Terms of Use     Privacy Statement      Form ADV