Managers of bond funds are rushing to snap up senior and tier-one debt issues from Barclays and HBOS as they are offering particularly attractive yields thanks to the government’s support programme.

Short-term dated UK bank bonds are among the best performers in the market, fund managers agree, as they are now offering yields of 4 to 5 per cent while gilts are yielding just over 4 per cent a year. And with another interest rate cut likely next week, demand for short-dated bonds is set to remain strong due to the weak economy.