He added: “Some people think QE and pension funds will be the saviour of stopping yields going higher, but if yields [rise] it will be a juggernaut and no amount will stop that.”
Mr Foster agreed and said the spike in US yields would override any effect of QE in Europe.
Mark Holman, chief executive of TwentyFour Asset Management, said the US election was a “regime change”, with yields having probably seen the low. His firm’s managers were removing rate exposure.
“If the world’s risk-free rate changes, it has an effect on virtually every asset class,” he said.
“I’m nervous about rates and it’s right that they have gone up to where they are now. We’re looking to hide out in ‘yieldy’ short-dated credit waiting for rates to adjust and then rebalance the portfolio.”
Projected fixed income yields
| Current yield %) | RLAM projection 31/12/2017 (%) | ||
| Gilts | 10-year | 1.5 | 2.1 |
| 30-year | 2.1 | 3 | |
| Treasuries | 10-year | 2.3 | 3 |
| 30-year | 3 | 3.8 | |
| Bunds | 10-year | 0.3 | 1.2 |
| 30-year | 0.9 | 1.9 | |
| Source: Bloomberg, Royal London Asset Management | |||
