Orbis Manager Prefers US Bonds to UK Gilts at Similar Yields

Speaking at a media event in London, Dunley-Owen said higher yields do not necessarily signal a looming fiscal crisis. In the United States, he sees them as a reflection of stronger economic growth and demand for capital. The US economy has weathered a series of shocks since 2020, he said, leaving him more confident about the balance of risk and return than five years ago.

US 10-year yields were about 1.5% in 2021/22, when some investors expected low inflation and low rates to persist, Dunley-Owen said. He now sees a 5% yield as offering a higher return alongside improved risk. Orbis’s bond allocation is still below its benchmark, but has been gradually rising as the firm finds bonds more attractive.

Dunley-Owen said the UK was not “falling apart”: revenue and GDP were growing, although he argued that growth was being held back by government policies focused on redistribution rather than investment. He cited the country’s underinvestment in industrial assets, heavy taxation of oil and gas, and reduced strength in education, legal and financial services. With UK gilts yielding about 5%, he said he saw no reason to lend to a lower-credit country rather than the US. He described the UK’s longer-term outlook as challenging unless conditions change.

He also said France’s problems were accelerating, which might prompt change, while Norway’s balance sheet was “rock solid.” Dunley-Owen said he owns Australian bonds and pointed to Brazilian sovereign yields of 15%, adding that Brazil was not low-risk but that inflation was being kept under control at 5% and should remain so.