FirstFT: UK gilts purchases soar as hopes of faster rate cuts fade

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Good morning. Private investors have piled into UK government bonds this year to lock in attractive yields as the Bank of England has kept interest rates at a 16-year high.

Hargreaves Lansdown, the UK’s largest do-it-yourself investment platform, said gilt purchases in the first three months of 2024 were three times higher than the same quarter last year, with gilts “by far and away” its most popular fixed-income product, according to Tom Lee, the company’s head of trading.

Interactive Investor, the second-largest DIY platform, said gilts had attracted more cash than any other investment for 10 straight months, while AJ Bell said four of its top 10 traded securities had been individual gilts so far this year.

When Hargreaves Lansdown experienced the first maturity of a gilt that was widely owned on its platform last year, “we saw a significant percentage of clients reinvesting back into other gilts”, said Lee, demonstrating the continued appeal of a security that before 2022 was often plagued by unappealing yields.

Analysts said a growing conviction that bond yields were likely to stay “higher for longer” was also pulling investors into other corners of fixed-income markets, a trend they expected to continue. Here’s more on how fading expectations of swifter rate cuts will affect markets.

Related: Prime Minister Rishi Sunak’s hopes of going into a general election on the back of lower taxes and cheaper mortgages suffered a blow yesterday as traders scaled back expectations of rate cuts this year.
Opinion: Eight centuries of interest rate data tells us that what’s happening now is not remotely unusual, writes Gillian Tett.

Here’s what else I’m keeping tabs on today and over the weekend:

Economic data: The National Institute of Economic and Social Research publishes its estimate for the UK’s March gross domestic product today, while Sweden reports inflation for the same month.
Companies: Earnings season kicks off with JPMorgan, Citi, State Street, Wells Fargo and BlackRock reporting today. US Steel shareholders will vote on Nippon Steel’s controversial acquisition offer.
Coachella: The music festival starts in California today, with Lana Del Rey and Doja Cat among the headline acts.
UK events: The Grand National horse race takes place at Aintree tomorrow, while the Olivier Awards, which recognise excellence in stage and theatre, will be held in London on Sunday.

How well did you keep up with the news this week? Take our quiz.

Five more top stories

1. The US has proposed issuing debt backed by future profits from frozen Russian assets to fund Ukraine, potentially raising tens of billions of dollars. G7 nations are split on how to use €260bn worth of Moscow’s assets to help Kyiv, but the issue has gained renewed urgency recently with additional US aid getting held up in Congress. Read the full story.

War in Ukraine: Russia has destroyed Kyiv’s largest power plant, and Ukraine has adopted a new mobilisation law to replenish its forces. Here are the latest updates on the war.
Sanctions regime: Swiss activists seeking to strengthen the country’s long-held neutrality have triggered a referendum on proposals that would end Switzerland’s harsh economic sanctions on Russia.

2. KKR is hastening plans to sell large investments or take them public after higher interest rates caused a two-year slowdown in takeovers and initial public offerings. The co-chief executives of the group, which helped pioneer the $15tn private capital industry, told the Financial Times that they were seeing signs of a revival in takeovers and global IPOs. Antoine Gara has more from New York.

3. Exclusive: Brookfield Asset Management is in advanced talks to buy a majority stake in $22bn private credit manager Castlelake, a specialist lender to airlines, as the world’s second-largest alternative investment manager uses acquisitions to push further into lending and debt investments that are benefiting from higher interest rates. Here are more details on the potential deal.

4. The US has asked China, Turkey, Saudi Arabia and others to urge Iran not to retaliate against Israel for its air strike on the Iranian consulate in Syria. US secretary of state Antony Blinken spoke to counterparts, including Chinese foreign minister Wang Yi, this week amid mounting concern in Washington of an imminent attack by Tehran.

Israel-Hamas war: Israel’s use of an automated targeting system powered by artificial intelligence in Gaza has raised new moral dangers, writes John Thornhill.
More US foreign policy: In a warning to Beijing, President Joe Biden stressed that the “ironclad” US-Philippines mutual defence treaty applied to attacks on Filipino armed forces, including in the South China Sea.

5. Three more US regulators have opened investigations into Morgan Stanley’s wealth management division and how it handles potentially risky clients, according to a person familiar with the matter. The business, which has been central to the bank’s growth in recent years, was already in the sights of the Federal Reserve over money laundering controls. Here are the regulators that have opened new probes.

The Big Read

Benjamin Netanyahu © Menahem Kahana/Pool/Reuters

Pressure on Israel has intensified in recent weeks, particularly over its planned assault on Rafah and accusations of restricting aid to besieged Gaza as hundreds of thousands of Palestinians face imminent famine. World leaders lined up last week to condemn Israeli air strikes that killed seven aid workers. Through it all, Israel’s prime minister has remained defiant and dismissive of criticism. But with his popularity among Israelis plummeting, is time starting to run out for Benjamin Netanyahu?

We’re also reading . . .

Thames Water: Meeting the UK water utility’s demands to in effect use customers’ money to bail it out would be the worst form of crony capitalism, writes Chris Giles.
AI chips race: Taiwan Semiconductor Manufacturing Company’s $65bn Arizona investment still leaves Washington short of being able to completely produce the most complex chips in the US.
Paris Olympics: A proposal to pay athletes for gold medals breaks with the modern Games’ 128-year history and has sparked debate over whether achievements in some events would be worth more.
Cryptocurrencies: Retail investors remain without regulated options despite the UK’s pledges to become a leader in digital assets.

Chart of the day

Boomers, once the target of millennial ire, are now a fading force demographically and electorally, writes John Burn-Murdoch. But the intergenerational conflict has obscured the rise of a privileged, property-owning elite within the ranks of thirtysomethings themselves: millennials who have benefited from family wealth.

Chart showing that millennials may trail boomers on average, but this masks growing wealth inequality between millennials, with the richest pulling far ahead of the rest

Take a break from the news

Go behind the scenes with Wes Anderson, the American filmmaker behind Fantastic Mr Fox and The Grand Budapest Hotel. Speaking from a secret set location for his newest production, Anderson tells HTSI’s Jackie Daly how he builds his iconic colour-saturated worlds.