The funding ratio of the typical U.S. corporate defined benefit plan with moderate risk rose five percentage points in January, spurred by rising corporate bond yields, according to a BNY Mellon Asset Management report.
The higher funding ratios provided some relief to battered pension plans, as represented by the BNY Mellon Pension Liability index, which experienced a decline of 31.5 percentage points in funded status during 2008, spokesman Michael Dunn said.
Long-duration, high-quality corporate bond yields rose 70 basis points in January, Peter Austin, executive director of BNY Mellon Pension Services, said in a news release. 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.