30 YEAR INDEX LINKED REAL YIELD – LAST 12 MONTHS

Over the past 2 weeks we have seen a rise in the level of 30yr Real Gilt Yields (from 0.046% on 31 Aug to 0.206% as at time of writing this note on the 14th Sept).
 
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Despite significant economic headwinds and uncertainty over-hanging financial markets, we have seen a "relief" rally following the recent announcements from the ECB, Wednesday's decision from the German Constitutional Court, and the FED's announcement last night confirming an open ended round of QE until unemployment drops "substantially".
 
For most pension funds, this rise in long term gilt yields and general support for risk assets will lead to an improved funding ratio.  Whilst we recognise that these yield levels still represent near record lows, we believe that, under the right scheme-specific risk framework, this may create opportunity for clients to "lock-in" this improvement and take a further step along their funding "flight plan".
 
Another upcoming policy event that may have an impact on the index linked gilt market and inflation swaps pricing will be Tuesday's publication of yesterday's CPAC (CPI Advisory Committee) meeting minutes.
 
We would be happy to discuss this current opportunity with you further and/or how we might be able to help you take advantage of similar opportunities in the future, always under a disciplined, funding objective consistent manner.
 
[Please note that all opinions expressed in this blog are the author’s own and do not constitute investment advice.  Click here for full disclaimer]
 

 

Author: Robert Gardner

Robert is Co-Founder and Non Executive Director at Redington Ltd. He started his career at Deutsche Bank before joining Merrill Lynch in 2003, working as Director in their Insurance and Pensions Solutions Group. In 2008, Robert also co-founded Mallowstreet, the online pensions community which continues to grow with presence and support from the industry. Robert is passionate about the impact of social media on business believing that education, collaboration and contributions are the best way to tackle pension challenges. In January 2019, Robert joined St. James's Place Wealth Management as Director of Investments.