Gilt yields up strongly with US fiscal cliff deal

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January analysis of annuities

The 15-year gilt yields increased by 29 basis points as the US fiscal cliff deal was agreed by congress. After staring the month at 2.31% the yields decreased to 2.60% and has been above 2.50% during the whole month.

The main factor for the increase was the US fiscal cliff where President Obama and Republican House of Representatives had been negotiating to avoid the implementation of $600 billion of spending cuts and tax rises from january 2013.

As a result investors have been confident to move funds from safe havens such as US Treasury Notes and UK government gilts to higher risk investments. This has reduced the price of gilts and increased the yields which should benefit pensioners as annuity rates increase at some time in the future.

For December the yields range for the month was from 2.31% to 2.63% or 32 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 - January 2013   Tues 1st Wed 2nd Thurs 3rd Fri 4th   2.31% 2.48%   0.17 2.56%   0.08 2.61%   0.05 Mon 7th Tues 8th Wed 9h Thurs 10th Fri 11th 2.57%   0.04 2.51%   0.06 2.51% 2.57%   0.06 2.57% Mon 14th Tues 15th Wed 16th Thurs 17th Fri 18th 2.52%   0.05 2.51%   0.01 2.50%   0.01 2.54%   0.04 2.52%   0.02 Mon 21st Tues 22nd Wed 23rd Thurs 24th Fri 25th 2.55%   0.03 2.53%   0.02 2.50%   0.03 2.53%   0.03 2.57%   0.04 Mon 28th Tues 29th Wed 30th Thurs 31st   2.62%   0.05 2.59%   0.03 2.63%   0.04 2.60%   0.03

Fig 2: Daily 15-year gilt yields and changes

Annuity rates were driven lower by the EU Gender Directive during December and since standard annuities have reduced by 0.46% and smoker rates increased by 2.15%. See Annuity Rates Review for the latest updates.