This month the Fund returned 3.8%, while the Index returned 4.7%. Bond markets generally performed well in August. The continuation of weak economic data provided support whilst the decline in oil and commodity prices eased inflation concerns. Shorterdated bonds saw the biggest yield declines as investors moved to anticipate interest rate cuts. In relation to the UK index-linked market, the focus was on index changes.The 2½% 2013 stock moved out of the Over 5 Year FT Actuaries Index causing the Index to lengthen by over a year and creating more demand for longer-dated assets. The 30-year stock saw its yield fall from 0.65% to below 0.4% at one point. UK indexlinked bond yields fell by 0.5% in shorter maturities whilst longer yields were 0.25% lower. We added some US Treasury Inflation-Protected Securities to the Trust during the month.The UK market looks increasingly expensive relative to major international markets, in part caused by the index change described above and in response we sold the UK 2 ½% 2016 and bought the US 3.375% 2032. The currency position was not hedged, exposing the Trust to the US dollar, which strengthened against Sterling. One auction of UK index-linked took place last month. The 2037 stock benefited from strong demand ahead of the index change.We continue to hold shorter and longer-dated issues where we believe the combination of value and demand is strongest. In our view, European and US index-linked bonds continue to offer a more attractive prospective return than in the UK.
159.90p
