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15-Year Gilt Yields for September 2011
Fig 5 below shows the change in 15-year gilt yields over the last 12 months and the current rate for 30th September 2011: |
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| 15-Year Gilt Yields over 1 year |
| Latest rate: |
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1 month change: |
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3 month change: |
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6 month change: |
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1 year change: |
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| 2.91% |
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0.43% |
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1.07% |
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1.24% |
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0.59% |
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| Fig 5: 15-year gilt yields chart showing rates to 30 September 2011 |
The 15-year gilt yields Fig 4 shows a significant reduction in the yields since June 2011 as a result of uncertainty over the Eurozone debt and the potential impact of Greece defaulting. Annuity rates are linked to gilt yields although providers may not change the rates immediately, however, eventually they will adjust rates to reflect the long term gilt yields.
Since the end of June the 15-year gilt yields have reduced by 107 basis points and annuity rates by 10.3%. As a rough guide a 50 basis point reduction in gilt yields translate to a 5% reduction in rates. During September there was also a close link between the equity markets and the gilt yields as investments moved from equities to gilts with greater uncertainty in the future of Europe and global recession. As a result with more money buying gilts the price increased thereby reducing the yield.
As equities fell so did the yield on gilts and then annuity rates resulting in a double negative impact on pensioner income where their pension funds reduced and the annuity rate based on this lower fund. The 15-year gilt yields reached a low of 2.85% for september and could go lower with further uncertainty. |
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