Ian Mills, partner at Barnett Waddingham, said: “For DB pension schemes this [rise in gilts] has mostly been good news – these schemes value their liabilities by reference to gilt yields and, for most, rising yields means an improving funding position.
"Importantly, most DB pension schemes’ funding positions will now be stronger than they were a week ago."
Pensions have more of a global exposure than previously and so are more susceptible to wider market fluctuations, added Becky O’Connor, head of pensions and savings at Interactive Investor.
"That may be reassuring given what is happening in the UK, but perhaps cold comfort given monetary tightening is still far from over in the US, as this could have a further dampening effect on equity markets," she said.
Losers
Pension funds holding liability driven investment strategies
However, some DB schemes face collateral calls in order to maintain their hedges on interest rates.
It was these products, and their impact on DB pensions' liquidity, that forced the BoE to suspend its bond buying programme.
LCP partner Dan Mikulskis observed on Twitter that these hedges “will have suffered big mark-to-market losses and will need more collateral to be placed to maintain exposures”. Schemes will generally want to do this, he added.
One consultant, who did not wish to be named, said: “Some of our investment consultants are of the belief that everything nearly ended for LDI [last week].”
Homeowners and landlords at the end of their rate fix
Hundreds of mortgage products have been withdrawn as a result of market fluctuations.
Lenders including Santander and HSBC removed their products from the market amid concerns that the "mini" Budget could prompt the Bank of England to hike interest rates, with many recalling all their fixed rate products as they scrambled to re-price them in light of soaring gilt yields.
Since the "mini" Budget, brokers have said the Financial Conduct Authority could find itself intervening in the mortgage lending market for years to come due to the sharp rise in mortgage rates.
The regulator entered into talks with lenders last week amid fears the daily repricing of mortgage interest rates has stretched many borrowers too far.
Landlords will also be impacted, with the majority of lenders pulling their fixed rate products from the market.
Some 37 lenders have pulled their fixed rate products for buy-to-let borrowers in recent weeks, with more expected to be pulled in the coming days.
