Bond traders turn bearish on gilts as election day nears

April has seen the largest fall in sentiment towards UK government bonds, according to the monthly Lloyds Bank Private Banking Investor Sentiment Index. Net investor sentiment for the asset class declined five percentage points from last month to 16 per cent.

A spokeswoman for Lloyds said the fall in sentiment towards Government bonds could be due to a combination of factors: “The sentiment is simply retracing after hitting an all-time high in March.

“There may be an element of caution with regards to valuation as the asset class has consistently delivered a solid positive performance month after month barring January and February earlier this year.”

She added: “There could be an element of caution about the asset class given the general uncertainty with the outcome of elections.”

Causes for concern include Labour’s perceived anti-business rhetoric, as well as the prospect of a British exit from the European Union under a Conservative-led Government.

UK corporate bonds have also seen a decline in sentiment amongst surveyed investors to 14 per cent, a monthly decrease of 3 percentage points.

Sentiment towards UK and international shares, on the other hand, remains strong with investor outlook for UK shares sitting at 37 per cent.

US shares have edged up to 19 per cent together with emerging market shares, increasing 3 percentage points from last month.

Among all asset classes, sentiment towards Eurozone shares recorded the largest monthly improvement of more than five percentage points, but the net balance remains in negative territory (-28 per cent).

Net sentiment remains strongest for UK property, increasing nearing 5 percentage points in April to 48 per cent.