US dollar weakness drives UK fund out of Treasuries and into gilts
Across three multi-asset funds worth a total of £1.8 billion (S$3.1 billion), London-based CG Asset Management (CGAM) has switched around £100 million out of US Treasury Inflation Protected Securities (Tips) and into UK inflation-linked government bonds since the end of March.
The move to skirt currency risk comes as the US dollar has slumped 7 per cent against the pound this year, with US President Donald Trump's unpredictable tariff policies and a widening deficit dragging on the greenback's appeal.
That depreciation now 'weighs a bit on any kind of long unhedged allocation to Tips or US conventional government bonds', portfolio manager Emma Moriarty said in an interview. She has now paused the reallocation as 70 per cent of the portfolios' exposure is sterling, a level 'at the very high end for where this would normally be'.
Within CGAM's largest multi-asset fund, the Capital Gearing Trust, the gilt linker portfolio returned 1 per cent over the second quarter whereas the Tips portfolio lost 6 per cent. Since April, Moriarty has grown holdings in UK index-linked bonds from 9 per cent to 15 per cent.
While longer maturity gilts have struggled this year given doubts about the UK's finances, Moriarty said so-called linkers have been closing the gap in performance with their American counterparts in their own right. Most linkers have gone from 'uninvestable' to 'good value', Moriarty said.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
'In relative terms, the UK is now in a much better position in that UK real yields are now quite elevated,' she added.
Still, in both markets, CGAM has shifted out of the short end of the curve after heightened short-term inflation expectations, and also out of the long-end given concerns of an economic slowdown and fiscal risks. Moriarty currently favours maturities between five and 10 years.
Historically, CGAM had favoured the US as the 'number one' most valuable inflation market as its outlook for outright real yields was 'really positive' due to expectations that they would track the relatively rapid growth rate of the US economy. But concerns over tariffs and the US dollar have changed that.
Moriarty has shrunk holdings in Tips from 28 per cent to 22 per cent in the last three months, with inflation-linked bonds hit particularly hard in April's market turbulence. The reallocation chimes with other investors also shifting money out of US dollar assets and into Europe.
'The biggest threat to the US dollar is actually just this rotation away from US assets,' Moriarty said. BLOOMBERG
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Straits Times
5 minutes ago
- Straits Times
US Democrats, Republicans plan bills to pressure China as Trump pushes trade
FILE PHOTO: U.S. President Donald Trump delivers remarks on artificial intelligence at the \"Winning the AI Race\" Summit in Washington D.C., U.S., July 23, 2025. REUTERS/Kent Nishimura/File Photo WASHINGTON - U.S. senators from both major parties plan to introduce bills this week targeting China over its treatment of minority groups, dissidents and Taiwan, emphasizing security and human rights as President Donald Trump focuses on trade with Beijing. The three bills, seen by Reuters ahead of their introduction, have Democratic and Republican sponsors, a departure from the fierce partisanship dividing Washington. Trump's push to reach economic agreements between the world's two biggest economies has strong support in Congress, especially from his fellow Republicans, but has prompted some China hawks to worry that the U.S. government is de-emphasizing security issues. "It does appear that President Trump is keen to negotiate some kind of deal with China, and gaps are opening between his approach to China and the approaches of some members of his team, as well as with Congress, which overall has been quite hawkish on China," said Bonnie Glaser, an Asia expert at the German Marshall Fund of the United States. The desire for a hard line on China is one of the few truly bipartisan sentiments in the perennially divided Congress, even as many lawmakers support Trump's efforts to rebalance the bilateral trade relationship. "The United States cannot afford to be weak in the face of the People's Republic of China and its aggression around the world," said Democrat Jeff Merkley of Oregon, a lead sponsor of all three bills. "No matter who is in the White House, America's values of freedom and human rights must remain at the heart of a clear and principled vision that guides our leadership on the global stage," Merkley said in a statement. Top stories Swipe. Select. Stay informed. Asia Thailand, Cambodia agree to 'immediate and unconditional ceasefire' to de-escalate border row Singapore Tanjong Katong sinkhole backfilled; road to be repaved after LTA tests Singapore Ong Beng Seng set to plead guilty on Aug 4 in case linked to ex-transport minister Iswaran Asia Gunman kills 5 security guards near Bangkok's Chatuchak market before taking own life Singapore COE quota up 2.6% to 18,701 for August to October Business Resilient economy versus uncertain outlook splits views on Singapore's monetary policy Singapore HPB looking for vaping, smoking counselling services for up to 175 secondary school students Singapore Jail for former pre-school teacher who tripped toddler repeatedly, causing child to bleed from nose White House officials have said that Trump remains fully committed to Asia-Pacific security issues as he pursues his trade agenda and a good personal relationship with Chinese President Xi Jinping. TRADE VS. SECURITY One bill, co-sponsored by Republican John Cornyn of Texas, would deny entry into the United States of current or former Chinese government officials who were deemed to have engaged in the forced repatriation of members of China's Uyghur minority. Human rights groups accuse China of widespread abuses of Uyghurs, a mainly Muslim ethnic minority numbering about 10 million in its northwestern region of Xinjiang. Beijing denies any abuses. Another, co-sponsored by Republican John Curtis of Utah, aims to help Taiwan as the island faces increasing pressure from China. It would support countries in Latin America and the Caribbean that maintain official diplomatic relations with Taiwan and would take other steps to deepen coordination with Taipei. China claims the democratically governed island as its own and has never renounced the use of force to bring Taiwan under its control. Beijing has stepped up military and political pressure against the island in recent years. A third bill, co-sponsored by Republican Dan Sullivan of Alaska, seeks to combat "transnational repression" - efforts by any foreign government to reach beyond its own borders to intimidate, harass or harm dissidents, journalists or activists. Facing Trump's August 12 deadline, top U.S. and Chinese economic officials will meet in Stockholm on Monday to try to tackle their longstanding disputes, hoping to extend a truce by three months and keep sharply higher tariffs at bay. Trump "cares about opening foreign markets to American trade, and that's what he's always cared about. And that is going to run counter to a lot of national security imperatives," said Michael Sobolik, who specializes in U.S.-China relations at the Hudson Institute. Democrats and some of Trump's fellow Republicans raised concerns about the announcement this month that Nvidia will resume sales of its H20 artificial intelligence chips to China, days after its CEO met with Trump. This reversed an AI restriction imposed in April that was designed to keep the most advanced AI chips out of Chinese hands. REUTERS
Business Times
5 minutes ago
- Business Times
Trump's AI plan to boost Asia data centre projects, says Singapore-based CEO
US PRESIDENT Donald Trump's AI Action Plan unveiled this week is set to be a positive driver for data centre projects in Asia, a Singapore-based industry executive said. The plan's increased clarity on chip shipment restrictions should help data centre businesses in the region, said Jamie Khoo, chief executive officer of DayOne Data Centers Singapore. That's a change from earlier in the year, when the US' intentions around export curbs created fear and discomfort in the industry, the head of the data centre operator said. Trump's AI Action Plan called for strengthening export controls and putting new location verification features in artificial intelligence (AI) chips, as the US' battle for tech supremacy with China intensifies. Clearer rules could make it easier for the Asia-Pacific region to use advanced graphics processing units with US tech, crucial for AI development. 'Obviously as time goes, the AI demand will definitely really be more important than anything else because that's the way things are going,' Khoo said. DayOne is looking to expand across Asia and Spain as it targets one gigawatt in total capacity, boosted by cloud and AI demand. Its latest addition is a 20-megawatt facility in Singapore, powered by renewable energy. Founded in 2022, DayOne operates data centres in markets including Malaysia, Indonesia, Hong Kong and Japan. BLOOMBERG
Straits Times
2 hours ago
- Straits Times
Trump and Starmer to meet in Scotland with trade and Gaza on agenda
Find out what's new on ST website and app. Mr Starmer (right) had hoped to negotiate a drop in US steel and aluminium tariffs as part of the talks. EDINBURGH/TURNBERRY, Scotland - US President Donald Trump will host British Prime Minister Keir Starmer at his golf resort in western Scotland on July 28 for talks ranging from their recent bilateral trade deal to the worsening hunger crisis in Gaza, the two governments said. Mr Trump, riding high after announcing a huge trade agreement with the European Union late on July 27, said he expected Mr Starmer would also be pleased. 'The prime minister of the UK, while he's not involved in this, will be very happy because you know, there's a certain unity that's been brought there, too,' Mr Trump said. 'He's going to be very happy to see what we did.' UK wants to discuss steel tariffs Mr Starmer had hoped to negotiate a drop in US steel and aluminium tariffs as part of the talks, but Mr Trump on July 28 ruled out any changes in the 50 per cent steel and aluminium duties for the EU, and has said the trade deal with Britain is 'concluded'. British business and trade minister Jonathan Reynolds told the BBC the talks with Mr Trump offered Britain a good chance to advance its arguments, but he did not expect announcements on the issue on July 28. Mr Trump and Mr Starmer were expected to meet at noon local time at Mr Trump's luxury golf resort in Turnberry, on Scotland's west coast, before travelling on together later to a second sprawling estate owned by Mr Trump in the east, near Aberdeen. Hundreds of police officers were guarding the perimeter of the Turnberry course and the beach that flanks it, with a helicopter hovering overhead, although there was no sign of protesters outside the course. Top stories Swipe. Select. Stay informed. Singapore Tanjong Katong sinkhole backfilled; road to be repaved after LTA tests Asia Gunman kills 5 security guards near Bangkok's Chatuchak market before taking own life Singapore HPB looking for vaping, smoking counselling services for up to 175 secondary school students Asia Cambodia says immediate ceasefire is purpose of talks; Thailand questions its sincerity Singapore Jail for former pre-school teacher who tripped toddler repeatedly, causing child to bleed from nose Singapore Police statements by doctor in fake vaccine case involving Iris Koh allowed in court: Judge Singapore Woman allegedly linked to case involving pre-schooler's sexual assault given stern warning Singapore Singapore lion dance troupe retains title at Genting World championship Mr Starmer was arriving from Switzerland, where England on July 27 won the women's European soccer championship final. Casting a shadow over their visit has been the deepening crisis in the war-torn Gaza enclave, where images of starving Palestinians have alarmed the world. British cabinet recalled Mr Starmer has recalled his ministers from their summer recess for a cabinet meeting, a government source said on July 28, most likely to discuss the situation in Gaza as pressure grows at home and abroad to recognise a Palestinian state. On July 25, he said Britain would recognise a Palestinian state only as part of a negotiated peace deal, disappointing many in his Labour Party who want him to follow France in taking swifter action. Mr Trump on July 25 dismissed French President Emmanuel Macron's plan to recognise a Palestinian state , an intention that also drew strong condemnation from Israel, after similar moves from Spain, Norway and Ireland in 2024. Mr Trump said that while the US would increase its aid to Gaza, it wanted others to join the effort. Ukraine was also on the agenda for talks with Mr Starmer. Dozens of Gazans have died of malnutrition in recent weeks , according to the Health Ministry in the Hamas-run enclave, with aid groups warning of mass hunger. The war began on Oct 7, 2023, when Hamas-led fighters stormed southern Israel, killing 1,200 people, mostly civilians, and taking 251 hostages back to Gaza, according to Israeli tallies. Since then, Israel's offensive has killed nearly 60,000 people in Gaza, mostly civilians, according to Gaza health officials. It has reduced much of the enclave to ruins and displaced nearly the entire population of over 2 million. REUTERS
