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31 May 2013 last updated
15-year gilt yields surge 35 basis point higher on strong economic data
15-year gilt yields chart
Based on figures for May 2013
15-year gilt yields May 2013
 

After reaching a low for the year of 2.15% the 15-year gilt yields have recovered strongly to end the month 35 basis points higher following strong economic data from the US, China and the UK.

gilt yields:  
annuity rates up 35 basis points

After a poor April for gilt yields investor confidence has been boosted with better than expected US Jobs data and strong equity growth for most of the month leaving yields at a high which will benefit annuity rates if they continue to improve.

 
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Unexpectedly good economic data lifts investor confidence

Investors were expecting poor results at the beginning of the month following April with the 15-year gilt yields reducing to 2.15%. With better than expected US data showing 165,000 new jobs were created compared to only 88,000 the previous month significantly improved confidence with investors moving funds away from safe havens to higher yielding investments such as equities.

In the UK the service sector indicated growth with the Bank of England deciding not to extend their stimulus programme called Quantitative Easing from the current £375 billion level.

This helped boost the FTSE-100 index 410 points to a high of 6,840 and the Dow Jones index 569 points to 15,409 as well as the Japan Nikkei to five and a half year high during the month.

UK annuities are primarily based on the 15-year gilt yields and a 35 basis point rise would result in a 3.5% increase in annuity rates coupled to a rise in equities if people remain invested before they buy their annuities means a larger pension fund and income at retirement.

For May the yields range for the month was from 2.15% to 2.57% or 42 basis points which is much greater 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 - May 2013
    Wed 1st Thurs 2nd Fri 3rd
   
2.21%
gilt yields down   0.01
2.15%
gilt yields down   0.06
2.27%
gilt yields up   0.12
Mon 6th Tues 7th Wed 8th Thurs 9th Fri 10th
 
2.34%
gilt yields up   0.07
2.32%
gilt yields down   0.02
2.34%
gilt yields up   0.02
2.44%
gilt yields up   0.10
Mon 13th Tues 14th Wed 15th Thurs 16th Fri 17th
2.44%
gilt yields no change
2.45%
gilt yields up   0.01
2.49%
gilt yields up   0.04
2.43%
gilt yields down   0.06
2.47%
gilt yields up   0.02
Mon 20th Tues 21st Wed 22nd Thurs 23rd Fri 24th
2.48%
gilt yields up   0.03
2.50%
gilt yields up   0.02
2.46%
gilt yields down   0.04
2.48%
gilt yields up   0.02
2.45%
gilt yields down   0.03
Mon 27th Tues 28th Wed 29th Thurs 30th Fri 31st
 
2.51%
gilt yields up   0.06
2.56%
gilt yields up   0.05
2.52%
gilt yields down   0.04
2.57%
gilt yields up   0.05
  Fig 2: Daily 15-year gilt yields and changes

Based on the changes in yields standard annuities are likely to increase in the short term by 3.06% with smoker and enhanced rates increasing by 1.96%. See Annuity Rates Review for the latest updates.

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