Interesting, this, and on the back of this week’s Budget announcements. The Government has surprised the markets by announcing plans to issue more than £220bn worth of government bonds during the course of this financial year, and this is well above the expected level. What has this to do with annuity rates, I hear you say? Read on.
With public borrowing expected to be well above £170bn during the next year, Chancellor Alistair Darling has just announced the Government will be forced into issuing £70bn worth of more gilts than the Debt Management Office (DMO) estimated just last month. Still wondering about those annuity quotes you’re considering getting? Read on.
The news of this sent the benchmark 10-year gilt yield up to around 3.45%, but it has since stabilised to around 3.41%. In March, the MPC decided to initiate the controlled purchase of £75bn of assets using central bank monies, and, as of 16 April 2009, the Bank of England had used this money to purchase £2.4bn of commercial paper, £0.5bn of corporate bonds, together with £31.5bn of gilts.
You’re still wondering what this has to do with getting annuity quotes. Well, I’ve written quite a few news items recently stating that one of the reasons for the fall in annuity rates has been the reduction in gilt yields. Now we have a upturn in yields, and the question is, will we see this filtering through to boost annuity rates? I hope so.
