Amid all the excitement that has surrounded soaring share prices and new highs on the FTSE index, a bull market has developed that seems to have been overlooked. Gilt-edged stocks have been moving ahead over recent weeks. Long gilt yields are down to 6.5 per cent and it is difficult to find a Government stock that you can buy under its redemption value. This is not as a result of the convergence story. It all hinges around one word - deflation.

Not everyone subscribes to the theory that deflation is likely to be with us sooner rather than later. But the world's greatest economy is growing steadily and has what amounts to zero unemployment, yet inflation is not a threat. The Fed decided against moving interest rates up this week. There was no need to.

Roger Bootle, chief economist at HSBC, the giant international bank, believes in the deflation theory. He was ahead of the game in his book, The Death of Inflation. His contention is that a rising cost of living is nothing like the problem it used to be.

Part of the reason for the decline in the power of inflation could be the rapid technological advancements being made. Each week seems to bring a story on a new, more powerful chip, exponential growth in the Internet or technology breaching another barrier.

The quiet revolution in matters such as tighter stock control, less waste, more efficient use of resources, better marketing techniques and so on owes everything to the growing sophistication of information technology. Quite a rosy picture, but what does it have to do with investment trends?

There are those who believe deflation should mean that bonds yield less than equities. I do not subscribe to this view, particularly as we seem to be in a position where economies can grow without severe inflationary pressures. However, with perceived wisdom at Government level now that borrowing is a bad thing, the supply of bonds could diminish, so further upward adjustment in the price of sovereign debt should not be ruled out.

Paul Thursby, manager of Barings Global Bond Trust, is of the opinion that fiscal austerity around the world will help bond markets almost everywhere. This is the first time in 20 years that governments have withdrawn from endeavouring to sustain GDP growth.

It is not just countries like Japan that have zero inflation, according to Paul. He rates bonds highly. I think he has a point. If you are as nervous of the stock market as Gartmore is, there looks to be little lost in putting your faith in bonds. Warren Buffett is.

Brian Tora is chairman of Greig Middleton's investment strategy committee and can be contacted on 0171 655 4000. His next column will appear on Saturday 18 October.