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15-Year Gilt Yields for October 2011

Fig 5 below shows the change in
15-year gilt yields over the last 12 months and the current rate for October 2011:

 
15-Year Gilt Yields over 1 year
Latest yield:   1 month change:   3 month change:   6 month change:   1 year change:  
2.90%  
gilt yields up   0.01%
 
gilt yields down   0.66%
 
gilt yields down   1.08%
 
gilt yields down   0.80%
 
15-year gilt yields - Sept 2011
Fig 5: 15-year gilt yields chart showing rates to October 2011


Fig 4 above shows the 15-year gilt yields with significant reduction in the yields from 3.98% on 30 June 2011 to a with yield of 2.90% on 31 October 2011. This has been due to uncertainty over the Eurozone debt and Greece defaulting. Annuity rates are linked to gilt yields As a rough guide a 50 basis point reduction in gilt yields translate to a 5% reduction in rates. Although providers may not change the rates immediately, however, eventually they will adjust rates to reflect the 15-year gilt yields which have been reducing for the past two decades.

To the end of October 2011 the 15-year gilt yields had reduced by 108 basis points and annuity rates by 10.48% since 30 June. There is also a close link between the equity markets and the gilt yields as investments moved from equities to gilts with greater uncertainty in the future of Europe and global recession. The FTSE-100 index had reduced from 6,000 by the end of June to 5,000 by the end of September. As money moved to buy gilts the price increased thereby reducing the yield. With both equities and annuity rates falling this has resulted with a
double negative impact on pensioner income where their pension funds reduced and the annuity rate based on this lower fund.

For October the 15-year gilt yields reached a low of 2.39% and could return to this level with further uncertainty in the Eurozone and worries over Greece defaulting on it's debt.
 
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