Gilt yields fall as coronavirus threatens slowdown for global growth

15-year gilt yields chart - Based on figures for February 2020

February 2020 Review

Providers of standard annuities reduced rates by -0.60% for February with 15-year gilt yields reducing 10 basis points and is now 41 basis points lower since the start of the year.

Investors are concerned with the potential slowdown in global growth caused by the spread of the coronavirus with funds heading for the safety of gilts and bonds.

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There is an increasing threat to trade and corporate earnings from coronavirus as the number of cases exceeds 100,000 and countries outside China such as South Korea, Iran and Italy establish quarantine measures to control the spread of the virus.

The 15-year gilt yield are lower by 10 basis points to 0.66% during February 2020 and approaching to the all time low reached in September 2019 of 0.566% following uncertainty of the UK leaving the EU without a deal.

Providers of standard annuities reduced annuity rates by an average of -0.60% for this month and we would expect rates to reduce by -0.50% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of 1.14% and rates and we would expect rates to decrease -2.24% 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   48%   22%   30% Increases of: max 3.4%   Decreases of: max -6.8%

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