LONDON, Jan 9 (Reuters) - The UK government bond market

has sent investors an unwelcome reminder of the kind of

volatility that can materialise when enough concern builds over

government finances, as yields soared to their highest since

2008 and the pound has dropped.

Benchmark 10-year gilt yields hit their highest

since August 2008 on Thursday, while sterling fell by

as much as 1.6% at one point, before selling abated, allowing

prices to stabilise a little.

This week's global selloff in government bonds, driven by

expectations for inflation to pick up, for interest rates to

fall more slowly and for government finances to feel more strain

has sent ripples through currencies and stocks, with the UK hit

especially hard.

Here's what bond fund managers and strategists are saying:

RANJIV MANN, SENIOR PORTFOLIO MANAGER, ALLIANZ GLOBAL

INVESTORS:

"We still favour owning gilts both on an outright and

relative value basis versus (German) Bunds and Canadian rates."

"Rising U.S. rates have been the primary driver of the

broader sell-off in global rates recently, given a combination

of a more hawkish Fed and expectations of a pro-growth fiscal

policy stance from the incoming Trump administration. Gilts have

followed the broader sell off in global rates."

"At the current level of gilt yields, the fiscal space

available to the government is now being eroded, which could put

pressure on the government to signal a tighter fiscal stance

ahead. A shift in the government's fiscal stance would begin to

present further downside growth risks for the UK economy this

year."

MATTHEW AMIS, INVESTMENT DIRECTOR, ABRDN:

"We've not really changed our position in the last 24 hours.

At the end of last year, we were long gilts versus U.S.

Treasuries. That worked well up until 24 hours ago. We're

lightly positioned there, and we're kind of inclined to hold it

here."

"We'll wait to see how the market trades in the next 24

hours. We've seen (former UK Prime Minister) Liz Truss, we've

seen various episodes like this in the gilt market before. So if

it continues to move, then we won't be standing in the way of

it."

RUSS MOULD, INVESTMENT DIRECTOR, AJ BELL:

"The UK is still feeling its way after the budget. The

biggest issue of all is that we need to have an honest discourse

about the widespread dissatisfaction with our public services."

"If we want to have a Scandinavian system, we'll need pay

the tax rates needed to fund it. The alternative is that our

public services will come to more resemble those in the U.S."

"The public need to be presented with that choice and it's a

decision that needs to be taken as a nation but politically,

it's not a decision anyone wants to be seen as forcing."

JAMES ATHEY, FIXED INCOME MANAGER, MARLBOROUGH:

"Government indebtedness is an increasing concern for

investors worldwide."

"The UK is not at the extreme end, its budget balance is not

worse than the U.S. or France, although sentiment does seem to

be particularly negative."

"We're still long UK and uncomfortably so. There are

concerns around fiscal policy and the supply issue, but that was

already in the price."

"Big assets managers were long gilts at the end of last

year....some of those positions may be getting squeezed out."

IAIN BARNES, CHIEF INVESTMENT OFFICER, NETWEALTH:

"Anyone who has been positioning portfolios really to build

into the outlook for UK growth will be worried that the

Chancellor is going to find other ways to increase the tax take

again."

"Anything with clear UK-factor exposure as well... anything

that's trading off the confidence in the UK market combined with

interest-rate exposures, has really struggled, so we're avoiding

those areas completely."

"You saw smaller companies in the UK get hit particularly

hard, we're focusing more of our exposure up at the long end."

PEDER BECK-FRIIS, ECONOMIST, PIMCO:

"If the current trends of rising yields and slowing growth

persist, the chances of spending cuts or tax increases will

increase for the government to adhere to its new fiscal rules."

"Although UK-specific factors, such as the budget, have

contributed to the rise, most of the increase has been driven by

rises in U.S. Treasury yields during the same period."

LINDSAY JAMES, INVESTMENT STRATEGIST, QUILTER INVESTORS:

"Whilst this will undoubtedly cut into Rachel Reeves' already

limited budgetary headroom, the likelihood of further tax rises

in the coming months seems slim."

"Spending cuts feel like the more likely outcome, with the

Treasury declaring yesterday that meeting the fiscal rules

remains 'non-negotiable.' With public services already

struggling and the investment budget seen as the source of

future growth, the decision of where cuts could fall will be

crucial. However, wherever the cuts may fall, her goal of

raising economic growth has just become that bit harder."

(Compiled by Amanda Cooper; Editing by Dhara Ranasinghe)