Gilt yields increase as Greece announce it is close to securing the next bailout deal

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October analysis of annuities

The 15-year gilt yields increased by 13 basis points during October 2.31% after being as high as 2.38% earlier in the month after Greece announced that it was close to agreeing the next 31 billion euros of the bailout deal and Spain avoided a downgrade of it's credit rating to junk status by credit rating agency moody's.

Later in the month estimates of Greek debt increasing to 189% of Gross Domestic Product (GDP) which was higher than expected and Spain's economy shrank by 0.3% during the third quarter, the fifth quarterly contraction in a row. As a result of the general bad news investors have been moving funds to safe havens such as UK government bonds and gilts forcing prices up and yields down.

For October the yields range for the month was from 2.14% to 2.38% or 24 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 - October 2012 Mon 1st Tues 2nd Wed 3rd Thurs 4th Fri 5th 2.19%   0.03 2.17%   0.02 2.14%   0.03 2.16%   0.02 2.23%   0.07 Mon 8th Tues 9th Wed 10th Thurs 11th Fri 12th 2.19%   0.04 2.19% 2.23%   0.04 2.24%   0.01 2.18%   0.06 Mon 15th Tues 16th Wed 17th Thus 18th Fri 19th 2.20%   0.02 2.28%   0.08 2.38%   0.10 2.37%   0.01 2.36%   0.01 Mon 22nd Tues 23th Wed 24th Thurs 25th Fri 26th 2.38%   0.02 2.30%   0.08 2.32%   0.02 2.38%   0.06 2.33%   0.05 Mon 29th Tues 30th Wed 31st     2.25%   0.08 2.28%   0.03 2.31%   0.03

Fig 2: Daily 15-year gilt yields and changes