Gilt yields on long-dated UK gilts have fallen back after US president Donald Trump announced a pause to additional tariffs on countries that were willing to negotiate with the US.
Yesterday (9 April), the yield on 30-year gilts rose to their highest level since the 1990s amid the turmoil in global markets and a sell-off in US Treasuries – reaching 5.675% before closing at 5.600%. This morning yields fell back, trading at 5.374% at 10:30am.
Yields on shorter-dated paper had not risen as much over the past week. Yields reached over 4.8% yesterday, the highest since the highs of around 4.9% set in mid-January. Today (10 April), yields had fallen back to around 4.665% by 10:30am.
Insight Investment head of solution design Jos Vermeulen said defined benefit (DB) schemes had entered the tariff storm in a position of strength – noting its estimates suggested that the impact on schemes has been "muted so far".
He said: "This is because of the widespread de-risking that has taken place throughout the DB world over the last two decades. These portfolios are designed to withstand turbulent conditions and portfolios have low exposure to risk assets. Governance practices were also enhanced after the gilts-crisis.
"As such, the healthy surpluses built up in this sector can be expected to remain that way, despite these conditions, which demonstrates the resilience of the DB system and its potential as a source of strength for the rest of the economy."
President Trump announces 90-day pause on most tariffs
Global markets rallied significantly since Wednesday (9 April) evening, after US President Donald Trump unveiled a 90-day pause on most tariffs.
The only country that was exempted by the move was China, which saw tariffs on its imports to the US rise from a previous total of 104% to 125%.
The Asian giant had already retaliated, increasing levies on US imports to China to 84% from the previous 34%.
The decision from the US president was incredibly welcomed by markets, which soared following the 90-day pause.
The S&P 500 closed 9.5% higher, followed by the Nasdaq Composite index, which was up more 12.1% - marking the best trading day for US stocks in 17 years, according to data from MarketWatch.
US Treasuries posted very small drops following Trump's shift in trade policy, but yields are currently notably higher than at the beginning of the week, with the US 10- and 30- Treasuries at 4.3% and 4.7%, respectively, from 3.9% and 4.3% on Monday (7 April).
