(Bloomberg) — Jupiter Asset Management’s Mark Nash took advantage of rising British government yields by adding to debt in hopes that the Bank of England would cut interest rates more than current market expectations.
“We are very long gilt and short sterling,” Mr. Nash, lead investment manager of the $672 million Jupiter Strategic Absolute Return Bond Fund, said in an interview. “At least four more rate cuts should be priced in.”
Nash joins a growing number of investors who are turning positive to British bonds in anticipation of further BoE easing and after yields soared to multi-year highs earlier this month. Money markets are currently pricing in 66 basis points of interest rate cuts by the end of the year, up from 37 basis points a week ago.
He has been buying bonds across maturities over the past week and a half, encouraged by slowing inflation, a subdued global bond selloff and British Prime Minister Rachel Reeves’ pledge to cut spending if borrowing costs rise again. I’ve been doing it.
Still, the retreat could resume if there are signs that the government’s fiscal situation will worsen further. Britain’s government bond market was the hardest hit by the bond crash at the start of the year, with billionaire investor Ray Dalio suggesting the country was at risk of a “debt death spiral”.
Nash’s fund returned 0.9% in 2024, with a cumulative return of 21.7% over the past five years. This corresponds to 5.3% and 12.9%, respectively, using the US overnight Fed rate as the benchmark.
He maintains a short position in the pound, primarily against the Japanese yen, which he expects will be supported by the Bank of Japan’s interest rate hike on Friday.
“Inflation has already started to fall further and the central bank will be keen to cut rates to support the economy,” he said. “Relatively speaking, the pound should weaken against other currencies.”
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