DB Plan Funded Status Retreats in November

A BNY Mellon Asset Management news release said plunging global equity markets combined with declining yields of long-term Treasury bonds contributed to the funding decline.

The funded status of the typical plan now has deteriorated by 2.7% year to date, according to the announcement.

Assets of a moderate-risk pension portfolio decreased 1.9% in November, while the value of typical pension liabilities advanced by 5.1%.  For the year to date, moderate-risk assets are up 7.1% while typical pension liabilities have increased 9.8%.

“The decline in equities pared the assets held by the typical U.S. pension plan,” said Peter Austin, executive director of BNY Mellon Pension Services, in the announcement.  “At the same time, flight to quality, recession fears, and expectations of a Fed easing brought about a large decline in interest rates.  The lower interest rates increase pension plan liabilities and the value of bonds.”

Austin noted that in November, long-maturity Treasury bond yields dropped 35 basis points, while two-year yields fell 91 basis points.  He added, “Corporate bonds did not fare well as worries over credit risk caused yield spreads to widen by more than 40 basis points.”