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£220Bn gilt spree to bring volatility for annuities

The Government’s issue of £220bn in extra gilts could lead to volatility in annuity rates for some time to come, says annuity provider LV=.

Head of annuities Matt Trott says the price of gilts fell in response to the Budget move. He says gilt yields could rise, which could lead to an improvement in annuity rates, depending on the relationship between the Government and the Bank of England.

Trott says: “The Bank of England is using quantitative easing to buy up gilts and, because there will be two different departments doing different things, I think we will see volatility in the annuity market for some time.

“It will depend on how the Government and Bank of England talk to each other across the Square Mile and how the new gilts that are issued match the gilts that the Bank of England is buying.”

Smith & Williamson director Mike Fosberry says: “There are two schools of thought, the deflationary school or inflationary school. I sit in the inflationary school. If the Govern- ment has issued extra gilts as part of quantitative easing, the issuance of further gilts is part of this process and will ultimately lead to higher inflation. Longer-term gilts will rise, so annuity rates will rise, subject to whether people will live longer.”


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Colombia has become the third country to request a credit line from the International Monetary Fund (IMF) under the Flexible Credit Line (FCL) facility, asking for $10.4 billion (£7.14 billion), according to the fund.Mexico has received approval for a $47 billion credit line, while the IMF is considering an application from Poland for a $20.5 […]

India Election Update

What a difference six months makes. Speaking in September last year, we had warned of ‘excessive pessimism’ afflicting the market’s perception of India. Since then, responsible central bank policy from the Reserve Bank of India (RBI), alongside improving global growth, has meant that India’s macro environment is strengthening quickly. The current account deficit has shrunk, inflation is falling and the government has embarked on a heavy dose of much needed fiscal consolidation. As a result, the rupee has been one of the strongest global currencies this year while the market has touched all-time highs, rallying by more than 20 per cent (GBP) since September. This begs the question: are we now in a period of ‘irrational exuberance’? Not yet.


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