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Recession fears in Europe see gilt yields
fall back from previous highs
Gilt Yields Update: 30 April 2012
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15-Year Gilt Yields over 1 year
Latest yield:   1 month change:   3 month change:   6 month change:   1 year change:  
2.67%  
gilt yields down   0.05%
 
gilt yields down   0.24%
 
gilt yields down   0.23%
 
gilt yields down   1.31%
 
15-year gilt yields 2012
Fig 1: 15-year gilt yields chart showing rates to April 2012

 

Gilt yields for April 5 basis points lower at 2.67%

Find out more: latest gilt yields

After last months significant rise in the 15-year gilt yields after the Federal Reserve discounted the need for Quantitative Easing 3 April experienced a fall in yields to a low of 2.54% before ending at 2.67% or down 5 basis points.

The uncertainty was due to a change in sentiment over Europe and an expectation that the Eurozone was heading for recession which would be deeper than expected. There was concerns for the global economy, comments made by the International Monetary Fund (IMF) that the Eurozone would undermine financial stability and the realisation that Spain may need a bailout as the banking system was virtually dependant on loans from the European Central Bank (ECB) to maintain their day-to-day liquidity. Spain's bond yields reached a high as investors see contagion spreading from Greece.

For April the yields range for the month was from 2.54% to 2.75% or 21 basis points which is less volatile than many other months. 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 2012
Mon 2nd Tues 3rd Wed 4th Thurs 5th Fri 6th
2.75%
gilt yields up   0.03
2.71%
gilt yields down   0.04
2.75%
gilt yields up   0.04
2.70%
gilt yields down   0.05
 
Mon 9th Tues 10th Wed 11th Thurs 12th Fri 13th
 
2.54%
gilt yields down   0.16
2.58%
gilt yields up   0.04
2.63%
gilt yields up   0.05
2.57%
gilt yields down   0.06
Mon 16th Tues 17th Wed 18th Thus 19th Fri 20th
2.58%
gilt yields up   0.01
2.64%
gilt yields up   0.06
2.67%
gilt yields up   0.03
2.70%
gilt yields up   0.03
2.71%
gilt yields up   0.01
Mon 23rd Tues 24th Wed 25th Thurs 26th Fri 27th
2.67%
gilt yields down   0.04
2.66%
gilt yields down   0.01
2.68%
gilt yields up   0.02
2.65%
gilt yields down   0.03
2.67%
gilt yields up   0.02
Mon 30th        
2.67%
gilt yields no change
       
  Fig 5: Daily 15-year gilt yields and changes


Despite there being a positive recovery in the 15-year gilt yields since reaching a month end low of 2.43% in January 2012, the problems of the Eurozone have not been resolved and therefore it is likely that should the banking crisis in Spain escalate investors will seek safer investments such as UK government bonds and gilts. This demand would increase the price and reduce the yields which would mean lower annuity rates for pensioners later this year.

As a rough guide if gilt yields reduced by 10 basis points this would mean a decrease in annuities by 1%. Currently if gilt yields increase by 10 basis points providers are likely to wait before following or may not reflect the full increase. See Annuity Rates 2012 for the latest updates.

 
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