The current volatility in the UK gilt market has reached a significant milestone. As reported in the Financial Times, 30-year gilt yields have climbed above 5.75%, their highest level since 1998. While the long end of the curve is increasingly sensitive to the UK’s broader fiscal trajectory, long-term borrowing requirements and political instability, the short end is also repricing rapidly driven by worries about inflation expectations.

The market has seen a sharp reversal in the Bank of England’s policy expectations. Previously pricing in rate cuts, traders now anticipate two to three rate hikes by year-end to counter resurgent inflation. This shift is clearly visible in 2-year gilts, which are now yielding ~4.5% from ~3.5% before the first US missiles reached Iran in late February, setting a new, higher floor for risk-free income in the UK.

In an environment where duration risk is being punished and the cost of borrowing is resetting higher, CVC Income & Growth (CVCIG) remains strategically positioned to benefit:

Floating Rate Tailwinds

Unlike fixed-income instruments that suffer capital erosion as yields rise, CVCIG’s portfolio is predominantly invested in floating-rate senior secured loans (c.80%). As base rates remain higher for longer, the coupons on these underlying assets adjust upward, directly enhancing the fund’s income generation.

Duration Neutrality

The floating-rate nature of the European leveraged loan market inherently limits interest rate duration. This allows the trust to capture the yield available in a high-rate environment without the capital volatility currently impacting fixed-rate government and corporate bond markets.

Meaningful Total Income

The market is now pricing in two rate hikes by the BoE in 2026, while at the start of the year the market was pricing in two rate cuts by the BoE in 2026. CVCIG offers a meaningful spread above these increasing base rates, underpinned by structural seniority and security of the underlying loans.

As the BoE prepares for a more aggressive rate cycle than previously forecast, CVCIG provides a resilient solution for investors looking to transform rate volatility into a tailwind for income.

This communication is provided for information only and should not be considered investment advice or a recommendation to invest. Past performance is not a reliable indicator of future results. Capital is at risk. UK investors only