Gilt yields stabilise after long period of volatility

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November analysis of annuities

The 15-year gilt yields decreased by 8 basis points and was the least volatile month of the year. After staring the month at 2.31% the yields decreased to 2.23% and was never below 2.18%.

The issues with Greece continue with an expectation that a deal will be reached over the 31 billion euro bailout ater numerious delays and bridging finance and debt auctions required to avoid default. Economic figures for the Eurozone indicate the growth forecast will be cut and moody's have downgraded Frances AAA rating to AA1.

Cyprus also agreed a 13 billion euro bailout with creditors with Spain's banks agreeing a 37 billion euro rescue in exchange 10,000 job cuts along with the US Fiscal cliff fears all contributed to investors keeping more of their funds in safe havens such as UK government bonds and gilts thereby increasing the price and decreasing the yield.

For November the yields range for the month was from 2.18% to 2.33% or 15 basis points which is more volatile than the previous month. Fig 2 below shows the daily 15-year gilt yields and the increase or decrease from the previous day's close:

15-Year Gilt Yields - November 2012       Thurs 1st Fri 2nd       2.33%   0.02 2.32%   0.01 Mon 5th Tues 6th Wed 7th Thurs 8th Fri 9th 2.28%   0.04 2.28% 2.22%   0.06 2.23%   0.01 2.19%   0.04 Mon 12th Tues 13th Wed 14th Thus 15th Fri 16th 2.19% 2.18%   0.01 2.23%   0.05 2.21%   0.02 2.20%   0.01 Mon 19th Tues 20th Wed 21st Thurs 22nd Fri 23rd 2.25%   0.05 2.32%   0.07 2.32% 2.31%   0.01 2.30%   0.01 Mon 26th Tues 27th Wed 28th Thurs 29th Fri 30th 2.30% 2.31%   0.01 2.23%   0.08 2.23% 2.23%

Fig 2: Daily 15-year gilt yields and changes