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Why we think yield compression will be limited

With inflation back to target the stage is set for a decline in interest rates. Indeed, we think that the 10-year gilt yield will have dropped to 3% by end-26. But we don’t think that will lead to much in the way of property yield compression. Rather, with the spread between property and risk-free rates currently narrow, a period of flat yields is required to bring the spread back to a more sustainable level.

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