Executive summary
This is an update of investment market movements over the last
five years and of economic conditions as at June 2010 for the UK
economy.
Equity markets fell with the FTSE-100 decreasing from 5413 at
the end of December 2009 to 4917 at end of June 2010. Equity
implied volatilities at June 2010 have increased after a dip
between June 2009 and December 2009, but have not yet reached the
levels observed at the end of 2008.
The Bank of England base rate remains at 0.5% and this has kept
short term gilt yields low with an upward sloping yield curve. At
medium durations, the yield curve has decreased with yields nearing
4.5% between terms 12 and 25 years compared to 5% at December 2009.
At long durations, the yields have remained constant compared to
December 2009. Swap yields are higher than gilts at the short end,
but still below gilt yields at the long end. The crossover point
for the swap and gilt curve is now 10 years, similar to that
observed at
