The main article examines whether UK retail investors may be distorting the gilt market. Gilts are not subject to capital gains tax for individual investors. After the financial crisis, coupons on new gilt issues were very low, in line with market yields at the time. As market yields rose, making fixed income a more investible asset class, the tax advantages for higher rate UK taxpayers of investing in low coupon gilts became more apparent. Low coupon gilts deliver more of their return through (untaxed) capital appreciation. There appears to have been significant retail inflows into these low coupon issues – might these flows depress yields enough to start eroding the tax advantages?
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