Pensions giant backs UK bonds amid bond market slump

Eakins said: “Yields may continue to rise despite the Bank of England’s pause, but we expect most of the central bank’s rate hikes are now over.”

Blackrock, the world’s largest money manager, has also started buying more government bonds.

Vivek Paul, senior strategist at Blackrock Investment Institute, said he had upgraded his view on UK bonds “just a few weeks ago” and was telling his clients to buy government debt over the next 12 months.

Rising bond yields have attracted some of the biggest funds to buy UK debt in recent months. as inflation has stabilized.

Nest, Britain’s largest pension scheme, recently said it would also start buying government debt for the first time in years amid signs that inflation is falling.

Andrew Balls, chief investment officer of global fixed income at Pimco, said government bonds were “quite attractive” relative to U.S. Treasuries.

The yield on 10-year government bonds stood at 4.57 percent on Friday, compared with 4.78 percent on 10-year Treasury bonds. While U.S. bonds pay a higher rate of return, investors are less convinced that inflation is under control and are therefore worried that higher interest rates will hurt their profits.

Balls said: “If bond yields of 4.5% are achieved, this still looks quite attractive given the range of risks to the outlook.”