The funded status of the typical U.S. corporate plan increased by 5.6 percentage points in May to 86.4%—the highest level in nearly two years.
BNY Mellon Investment Strategy & Solutions Group (ISSG) says the improvement was driven by a jump in the Aa corporate discount rate, which drove liabilities lower.
Liabilities for the typical corporate plan fell 6.3% as the discount rate on the Aa corporate bonds increased 43 basis points to 3.13%, the sharpest rise in nearly two years.
“Signs that the quantitative easing program will end, coupled with rising consumer confidence, are making bonds less attractive, which is sending interest rates higher,” says Jeffrey B. Saef, managing director with BNY Mellon Investment Management and head of the ISSG. “Corporate plans are in much better shape and expressing increasing interest in strategies that could protect them from future funded status volatility.”
On a year-to-date basis, the funded ratio of plans has jumped by 10.1 percentage points.