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30 April 2013 last updated
Further falls in gilt yields due to fears over US jobs and the eurozone
15-year gilt yields chart
Based on figures for April 2013
15-year gilt yields April 2013
 

The 15-year Gilt yields were volatile reducing to 2.17% during the month after poor US job data recovering strongly as equity markets gained only to fall again with fears over Cyprus selling their gold and criticism of the ECB bailout plan by the Bundsbank.

gilt yields:  
annuity rates up 11 basis points

The 15-year gilt yields have been on a downward trend as investors move funds to safe havens to avoid the uncertainty in the eurozone and this has resulted in low annuity rates from providers.

 
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Investor fears for US and eurozone creates volatility

15-year gilt yields reduced to 2.17% after fears over the US job data suggested the US economy may not recover which would impact other countries and risk recovery resulting with investors moving funds to safe havens such as US Treasury notes and UK government debt such as bonds and gilts.

Since starting the month at 2.33% the 15-year gilt yields have reduced by 11 basis points to 2.22%. In particular impaired annuity providers have reduced their rates Annuities are based primarily on the 15-year gilt yields so any changes in yields up or down will see this change in the rates from providers. As a general rule an 11 basis point fall in yields would result in a 1.1% decrease in annuity rates.

The Bundesbank has attacked the European Central Bank (ECB) plan to bailout struggling eurozone members. The plan is said to be beyond the mandate for the ECB and the German courts will rule in June if president Mario Draghi pledged to do "whatever it takes" to rescue the euro by purchasing the debt of countries in financial difficulty is sound or not.

This pledge has been the main reason why yields in the UK have risen as investor confidence was restored and they moved funds to higher yielding investments in Europe.

For April the yields range for the month was from 2.17% to 2.34% or 17 basis points which is not as volatile as 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 - April 2013
Mon 1st Tues 2nd Wed 3rd Thurs 4th Fri 5th
 
2.34%
gilt yields up   0.01
2.32%
gilt yields down   0.02
2.28%
gilt yields down   0.04
2.17%
gilt yields down   0.11
Mon 8th Tues 9th Wed 10th Thurs 11th Fri 12th
2.22%
gilt yields up   0.05
2.27%
gilt yields up   0.05
2.32%
gilt yields up   0.05
2.33%
gilt yields up   0.01
2.29%
gilt yields down   0.04
Mon 15th Tues 16th Wed 17th Thurs 18th Fri 19th
2.27%
gilt yields down   0.02
2.29%
gilt yields up   0.02
2.24%
gilt yields down   0.05
2.23%
gilt yields down   0.01
2.22%
gilt yields down   0.01
Mon 22nd Tues 23rd Wed 24th Thurs 25th Fri 26th
2.20%
gilt yields down   0.02
2.25%
gilt yields up   0.05
2.25%
gilt yields no change
2.28%
gilt yields up   0.03
2.24%
gilt yields down   0.04
Mon 29th Tues 30th      
2.21%
gilt yields down   0.03
2.22%
gilt yields up   0.01
     
  Fig 2: Daily 15-year gilt yields and changes

Based on the changes in yields standard annuities are likely to fall in the short term by 0.77% with smoker and enhanced rates to fall by 1.08%. See Annuity Rates Review for the latest updates.

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