Further safe-haven flows and growing expectations of a further cut in official interest rates and more QE have caused gilt yields at the short end of the curve to fall to within a whisker of zero. Yields on government debt are already negative in six European countries, and we see no reason why the UK cannot join this club. If we are right to expect at least one country to exit the euro-zone over the next year or so, then the resulting increase in safe-haven demand would probably be sufficient for investors to start paying the UK government to look after their money.
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