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Gilt yields 21:10 - May 23 with 1877 viewsportmanking

Soaring across the board. Entering dangerous territory for pension funds once again...

Swap rates have risen in the last couple of days too. Getting a bit twitchy over interest rates, I must say.
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Gilt yields on 21:18 - May 23 with 1807 viewssurreyblue

Pension funds are in a much better shape to deal with these rises today compared to September last year. It wasn't the absolute level of gilt yields that was the issue, it was how quickly they rose. While they are steadily rising again, pension schemes have built in a much higher buffer than was the case 12 months ago.
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Gilt yields on 21:22 - May 23 with 1791 viewsBanksterDebtSlave

Is this something to do with trying to turn off the QE tap again?

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Gilt yields on 23:27 - May 23 with 1567 viewsrgp1

Gilt yields on 21:22 - May 23 by BanksterDebtSlave

Is this something to do with trying to turn off the QE tap again?


No it's a country living beyond its means with 2.2 Trillion of debt that only a handful of economists ever seem to mention.
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Gilt yields on 10:15 - May 24 with 1282 viewsportmanking

Gilt yields on 21:18 - May 23 by surreyblue

Pension funds are in a much better shape to deal with these rises today compared to September last year. It wasn't the absolute level of gilt yields that was the issue, it was how quickly they rose. While they are steadily rising again, pension schemes have built in a much higher buffer than was the case 12 months ago.


You have to hope so. Market expectations are now rapidly approaching mini-Budget levels.

There really needs to be some serious discussion about supply-side reforms, particularly as this inflation is stoked solely by this. Demand is already being choked.
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Gilt yields on 15:45 - May 24 with 1131 viewsBlueandTruesince82

Let's also consider that if the US politicians can't agree a new debt ceiling the knick on ripples could be huge. So many countries living above their means, with aging populations leading to lower tax income for the state.

Tick, tick, tick.

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Gilt yields on 15:53 - May 24 with 1098 viewsKeno

I agree Gilt Yields are rising for a number of reasons but can I just ask what makes yay say "Entering dangerous territory for pension funds once again... ?"

From the FT "While a 4 per cent fall does not sound a lot, as a rule of thumb, a 1 per cent fall in UK government gilt yields can increase DB pension liabilities by around 20 per cent. So, the impact of falling UK government gilt yields by around 4 per cent over the past 10 years or so has had an immense impact on UK DB pension schemes"

Surely rising gilt yields take the pressure off DB funding?

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Gilt yields on 19:33 - May 24 with 976 viewssurreyblue

Gilt yields on 15:53 - May 24 by Keno

I agree Gilt Yields are rising for a number of reasons but can I just ask what makes yay say "Entering dangerous territory for pension funds once again... ?"

From the FT "While a 4 per cent fall does not sound a lot, as a rule of thumb, a 1 per cent fall in UK government gilt yields can increase DB pension liabilities by around 20 per cent. So, the impact of falling UK government gilt yields by around 4 per cent over the past 10 years or so has had an immense impact on UK DB pension schemes"

Surely rising gilt yields take the pressure off DB funding?


In most market conditions, yes.

Many pension schemes use a leveraged gilts portfolio to help reduce the mismatch between assets and liabilities - so of the liabilities rise by 20% because gilt yields have fallen, the assets may rise by 15% as a result of the leveraged gilts portfolio.

This works vice versa as well - so as you say it would ease pressure on DB funding levels if yields go up.

The problem comes whe yields go up very quickly. Because the strategies are leveraged, if the value of the gilt falls, you might end up in negative equity, at which point the bank takes back the borrowed assets and the pension scheme becomes mismatched.

Last year, most pension schemes could withstand yields increasing by 1.5-2.5% in a short period. Now that number is more like 3-5%.
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Gilt yields on 20:05 - May 24 with 934 viewsbalcombeblue

Gilt yields on 19:33 - May 24 by surreyblue

In most market conditions, yes.

Many pension schemes use a leveraged gilts portfolio to help reduce the mismatch between assets and liabilities - so of the liabilities rise by 20% because gilt yields have fallen, the assets may rise by 15% as a result of the leveraged gilts portfolio.

This works vice versa as well - so as you say it would ease pressure on DB funding levels if yields go up.

The problem comes whe yields go up very quickly. Because the strategies are leveraged, if the value of the gilt falls, you might end up in negative equity, at which point the bank takes back the borrowed assets and the pension scheme becomes mismatched.

Last year, most pension schemes could withstand yields increasing by 1.5-2.5% in a short period. Now that number is more like 3-5%.


They need to seek some PRT then......
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