Stock Market Gains Outpace Rising Liabilities to Improve Funding Status of U.S. Pensions, According to BNY Mellon Asset Manageme
October 06 2009 - 9:02AM
PR Newswire (US)
Funding Status of Typical Corporate Plan Tops 80 Percent BOSTON,
Oct. 6 /PRNewswire-FirstCall/ -- U.S. stocks rose for the seventh
consecutive month, helping to increase the funded status of the
typical U.S. corporate pension plan by 0.6 percentage points in
September, according to monthly statistics published by BNY Mellon
Asset Management. The funded status of the typical plan increased
to 80.3 percent at the end of September, up from 79.7 percent at
the end of August, according to the BNY Mellon statistics. Assets
for the typical U.S. corporate plan increased 2.9 percent versus a
gain of 2.1 percent for liabilities during the month. For the year,
through September 30, the funding ratio for the typical plan is now
up 6.4 percentage points, and has topped 80 percent for the first
time since May, as represented by the BNY Mellon Liability Index.
"As was the case in August, pension plans in September benefited
because improving stock markets in the U.S. and around the world
rose enough to increase plan assets faster than the increase in
liabilities, which once again was driven by the decline in Aa
corporate bond yields," said Peter Austin, executive director of
BNY Mellon Pension Services, the pension services arm of BNY Mellon
Asset Management. "The long Aa corporate bond discount rate
continued its long descent, dropping 14 basis points in September
to 5.61 percent. Discount rates are now at their lowest levels
since August 2005." Plan liabilities are calculated using the
yields of long-term investment grade corporate bonds. Lower yields
on these bonds result in higher liabilities. "Demand for corporate
bonds and generally improving financial markets are quickly
narrowing the spread between these bonds and Treasuries to more
historical levels," said Austin. "This demand has received a boost
from plan sponsors who are buying the bonds to control the risk and
volatility in their plans. Now that these spreads have narrowed,
sponsors need to evaluate the risks in the equities markets versus
the probability of further declines in the yields for these bonds."
Notes to Editors: BNY Mellon Asset Management is the umbrella
organization for BNY Mellon's affiliated investment management
firms and global distribution companies. BNY Mellon is the
corporate brand of The Bank of New York Mellon Corporation
(NYSE:BK). BNY Mellon is a global financial services company
focused on helping clients manage and service their financial
assets, operating in 34 countries and serving more than 100
markets. The company is a leading provider of financial services
for institutions, corporations and high-net-worth individuals,
providing superior asset management and wealth management, asset
servicing, issuer services, clearing services and treasury services
through a worldwide client-focused team. It has $20.7 trillion in
assets under custody and administration, $926 billion in assets
under management, services $11.8 trillion in outstanding debt, and
processes global payments averaging $1.8 trillion per day.
Additional information is available at bnymellon.com. All
information source BNY Mellon Asset Management as of June 30, 2009,
except where noted. This press release is issued by BNY Mellon
Asset Management to members of the financial press and media and
the information contained herein should not be construed as
investment advice. Past performance is not a guide to future
performance. DATASOURCE: BNY Mellon CONTACT: Mike Dunn,
+1-212-922-7859, Web Site: http://www.bnymellon.com/
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