Understanding general market bond movements

I have noticed that the steady increase in bond prices that has occurred has rapidly reversed in the past week -all mine are off between 0.3 and over 1 point in the case of the new IPF one. I assume this is related to the change in the direction of gilt prices as shown on the home page (?). I have been trying to figure out the relationship between the two ie if the gilts drop 1% is there a rule of thumb as to what this would be expected to do to bonds with say 5 years to go?

Also anyone any ideas on why the change (ie is the market now seeing (more) inflation on the horizon) - hadnt heard anything though the new BoE is supposedly more happy to allow a little more inflation than the outgoing one. Just a thought.

Any insight appreciated as a chunk of my recent equity gains is being eroded by the bond drops in recent days !

Comments

  • Bank of England growth upgrade = less chance of more QE = less BoE buying of gilts = lower prices of gilts = higher yields.

    To be honest, your bond portfolio should be a hedge against your equity portfolio to a certain extent. In normal times (ie ex QE) they should not be moving in the same direction as higher growth = higher equities but eventually higher interest rates and therefore lower bonds.
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