Yields fall with fear of economic slowdown

The 15-year gilt yields rise during the month as there was an expectation of the Federal Reserve continuing their policy to increase interest rates in the US to counter a rise in inflation.

The 15-year gilt yield decreased by 9 basis points to 1.62% during October 2018 with providers of standard annuities increasing rates by an average 0.59% for this month and we would expect rates to fall by -1.49% in the short term if yields do not fall.

For smoker and enhanced annuity providers have increased their rates by an average of 0.59% and rates may rise by -1.64% in the short term if yields do not fall.

Fig 1 below shows the annuity rates changes for the whole market and the proportion that have either increased, decreased or or did not change. It also shows the range of the changes of the annuity rates over the last month:

Annuity Rates Changes Increase No change Decrease   65%   23%   12% Increases of: up to 7.1%   Decreases of: up to -1.2%

Fig 1: Annuity rate changes for the whole market

Fig 2: Change in standard rates last month compared to gilt yields

Fig 3: Change in enhanced rates last month compared to gilt yields