Gilt yields rise 43 basis points as investors expect higher base rates

15-year gilt yields chart - Based on figures for February 2023

Annuity Rates UK - February 2023 review

The 15-year gilt yields increased by 43 basis points to 4.13% which is the highest closing figure since September 2022. After the mini budget yields increaseed to a fourteen year high of 5.09 before falling back and closing at 4.24%.

Investors expect central banks to raise base rates with strong economic data and higher inflation in the US and Europe.

The Federal Reserve could be more hawkish about increase base rates in the next few months and other central banks are likely to follow to counter fall in currencies.

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Providers of standard annuities increased annuity rates by an average of +0.22% for this month and we would expect rates to rise by +4.08% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of +0.21% and we would expect rates to rise by +4.09% 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   77%   0%   23% Increases of: max 3.0%   Decreases of: max -5.3%

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