Branch2 Intelligence
UK investors turn to bonds as equities valuations continue to stretch
Key takeaway
UK investors pulled over £1bn from equities into bond funds in June, the third-strongest month for fixed income inflows on record.
- Step 11st-order: UK investors rotate £1bn+ from equities into bond funds in June due to stretched valuations and risk aversion.
- Step 22nd-order: Bond inflows compress gilt yields temporarily, but the equity sell-off raises the equity risk premium, increasing the cost of equity capital for UK-listed companies.
- Step 33rd-order: Higher cost of equity makes debt financing relatively cheaper, but banks tighten lending standards as risk appetite falls, squeezing SME access to both equity and debt.
Source: City A.M.
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