David Fuller's view In an environment where the economy is growing, albeit at a lacklustre pace, inflation is above target, Quantitative Easing is on hold and uncertainty about the forthcoming General Election, the longer term outlook is one of rising gilt yields. With spare capacity in the economy the deflationary threat is still real and this may well temporarily provide support to gilt prices. However, this will also provide bond investors with further opportunities to reduce duration and rotate to a more defensive stance as gilt yields begin to rise. At North, we have constructed our own structured product to reflect our bearish stance on gilts within our portfolios. Whilst, it is difficult to directly sell short government bonds, the 10 year swap rate does provide a suitable alternative. Essentially we are looking to make a return of 12% per annum should 10 year gilt yields rise from their current level of 4% to 6% over the next five years, a return, for our investors, of £1.60 for every pound invested.