Pension Plan Funding Status Improves in January

February 4, 2009 ( - Funding ratios at the typical U.S. corporate pension plan rebounded five percentage points in January, according to BNY Mellon Asset Management.

The improvement was thanks to higher corporate bond yields which drove liabilities 10.1% lower, according to a press release. Assets at moderate risk pension portfolios declined 5.5% as stock markets fell. 

“Long-duration, high-quality corporate bond yields rose 70 basis points in January,” said Peter Austin, executive director of BNY Mellon Pension Services, in the announcement. “Corporate bond yields remain at historically high levels and corporate spreads continue to be very wide.   Plan sponsors are increasingly aware of the negative results that falling corporate yields would inflict on pension liabilities and are quite wary of the current environment.”

Austin noted that BNY Mellon Asset Management is seeing significant interest in its longer term corporate bond strategies from pension plans that are seeking to limit the impact that a sharp fall in bond yields would have on their funded status (see LDI Relatively Strong Performer in Downturn ).