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Highlights
- On Tuesday, nervous investors strongly bought into the long-term dated government debt.
- Yields on UK gilts have been elevating over the past weeks.
- During normal times, the longer-dated bonds usually pay more than the two-year ones.
On Tuesday, nervous investors strongly bought into the long-term dated government debt, signalling that the financial sector may be moving towards a catastrophic situation. Yields on UK gilts have been increasing over the past weeks, indicating that the investors are anticipating higher rates of return by lending their money to the government.
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Following last night’s trends, the so-called yield curve inverted again on Tuesday, with the ten-year bond paying 2.97% and the two-year government gilts paying more, at 3.21%. During normal times, the longer-dated bonds usually pay more than the two-year ones. However, at present, investors are satisfied with taking less interest in return for security.
A similar yield curve inversion occurred just before the 2008 global financial crash. At that time, anxious investors shifted their money to long-term government bonds as they sensed trouble ahead. Due to the fears of upcoming financial distress, the pound has been taking a hit lately. On Monday, sterling was trading under $1.1500, which has never happened since 1985.
The inverted yield curve is signalling a possible recession in the UK, and investors are exploring potential investment options to protect their money. UK investors can keep an eye on the following recession-proof stocks, which are more defensive and may survive an economic slowdown.
British American Tobacco plc (LON: BATS)
The market cap of the cigarette manufacturing business, British American Tobacco plc, stands at £78,090.54m as of Tuesday. Going up by 0.17%, BATS shares were trading at GBX 3,477.50 at around 1:30 PM (GMT+1) on 6 September. Offering shareholders an annual dividend yield of 6.3%, the FTSE 100 company has an EPS (earning per share) of 2.97. Its P/E ratio currently stands at 15.09. British American Tobacco has offered shareholders positive returns of 28.26% over the last year, while its YTD (year-to-date) return stands at 27.20% as of 6 September.
Glencore plc (LON: GLEN)
The market cap of the commodity trading and mining business, Glencore plc, stands at £61,405.17m as of Tuesday. Going up by 1.95%, GLEN shares were trading at GBX 480.70 at around 1:30 PM (GMT+1) on 6 September. Offering shareholders an annual dividend yield of 2.5%, the FTSE 100 company has an EPS of 0.38. Its P/E ratio currently stands at 4.37. Glencore has offered positive returns of 44.35% to shareholders over the last year, while its YTD return stands at 28.22% as of 6 September.
National Grid plc (LON: NG.)
The market cap of the biggest publicly traded utility business worldwide, National Grid plc, stands at £39,913.23m as of Tuesday. Going down by 1.65%, NG. shares were trading at GBX 1,072.50 at around 1:30 PM (GMT+1) on 6 September. Offering shareholders an annual dividend yield of 4.7%, the FTSE 100 company has an EPS of 0.65. Its P/E ratio currently stands at 17.90. National Grid has offered shareholders positive returns of 13.97% over the last year, while its YTD return stands at 1.25% as of 6 September.
