Declining interest rates send liabilities higher

BOSTON, May 10, 2010 — A plunge in the Aa corporate discount rate in April drove liabilities higher and the funded status lower for the typical U.S. corporate pension plan, according to monthly statistics published by BNY Mellon Asset Management.  The funded status in April declined 1.8 percentage points to 86.3 percent.

Through the end of April, the funded status of the typical U.S. corporate plan is up 0.8 percentage points for the year.

The Aa corporate discount rate in April fell from 5.96 percent to 5.72 percent. This led to a 3.4 percent increase in liabilities, which more than offset the 1.3 percent increase in assets at the typical U.S. corporate plan in April, as reported by the BNY Mellon Pension Summary Report for April 2010.  Plan liabilities are calculated using the yields of long-term investment grade corporate bonds.  Lower yields on these bonds result in higher liabilities.  

"While U.S. stocks experienced their third consecutive positive month in April, international stocks declined, partly due to the strengthening U.S. dollar," said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management.  "Taken together, equities in general were too weak to overcome the increasing liabilities that typical U.S. corporate pension plans faced in April."

Austin added, "Corporate spreads declined to their lowest levels in almost three years. Debate continues over interest rate trends, which have driven many plan sponsors to adopt liability driven investing (LDI) strategies to better manage pension plan funding risk. Additional concerns over the U. S. budget deficit and Europe's financial situation are leading many plan sponsors to think beyond LDI and adopt very specific objectives for their pension plans, including defined funding levels and target dates for achieving those funding levels. We see interest in these approaches gaining more momentum as plan sponsors increase their vigilance in managing pension plan funding volatility."

Notes to Editors:

BNY Mellon Asset Management is the umbrella organization for BNY Mellon's affiliated investment management firms and global distribution companies.

BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has $22.4 trillion in assets under custody and administration, $1.1 trillion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.5 trillion per day. Additional information is available at www.bnymellon.com.

All information source BNY Mellon Asset Management as of March 31, 2010. This press release is qualified for issuance in the US only and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. This press release is issued by BNY Mellon Asset Management to members of the financial press and media and the information contained herein should not be construed as investment advice.  Past performance is not a guide to future performance. A BNY Mellon Company(SM)