Fixed Interest
In the US, further solid employment data and a rise in inflation have increased expectations of an interest rates hike this year. In a similar fashion to the previous increase in 2015, Janet Yellen and her fellow US Federal Reserve members have become increasingly hawkish in recent weeks in order to prepare the market for this event. As a result, bond yields have started to rise, although this has been focused more on the short to medium end of the yield curve. In August, 1 month Treasury yields increased from 0.19% to 0.26%, whereas 30 year bond funds have increased only from 2.18% to 2.23%. This reflects the fact that participants still view the prospect for longer term interest rate increases as muted, suggesting that economic growth will be lower in the future.
As widely expected, the UK moved to cut interest rates to a new record low of 0.25% and expand the level of Quantitative Easing to £435bn. Despite the cut, a similar pattern to the US yield curve was observed with short end rates rising and long-term rates declining significantly in August, reflecting concern over an amicable UK exit from the European Union and how this reflects long-term prospects. 1 year gilt yields rose from 0.07% to 0.15% with 30 year gilts falling from 1.54% to 1.24%.
Property
In the property sector, a large number of open-ended funds remain suspended, although discounts to Net Asset Value have narrowed somewhat as some normality returns to the market. The F&C Commercial Property Trust, our favoured closed ended fund, edged up 1.5% on the month and, although still at a discount of around 5% to Net Asset Value, is well above the lows experienced in the immediate aftermath of Brexit.
Alternatives
In the property sector, a large number of open-ended funds remain suspended, although discounts to Net Asset Value have narrowed somewhat as some normality returns to the market. The F&C Commercial Property Trust, our favoured closed ended fund, edged up 1.5% on the month and, although still at a discount of around 5% to Net Asset Value, is well above the lows experienced in the immediate aftermath of Brexit.
If you are unsure whether an investment is right for you, please contact us for advice on 0800 877 8866 or by email at enquiries@whirelandwm.com.