Strong performances by stocks around the world drove the assets of the typical U.S. corporate pension plan higher in July, sending the funded status of these plans up 2.9 percentage points to 76.9 percent, according to monthly statistics published by BNY Mellon Asset Management.

U.S. stocks rose 6.9 percent and international stocks returned 9.5 percent, mostly due to the strengthening euro, which resulted in an increase of 4.8 percent for the value of the assets in these plans in July, according to the BNY Mellon Pension Summary Report for July 2010. The report also notes that corporate spreads in July tightened slightly, which lowered the Aa corporate discount rate to 5.29 percent from 5.34 percent. This slight decline sent liabilities for the typical corporate pension plan up 0.9 percent for the month.

Plan liabilities are calculated using the yields of long-term investment grade corporate bonds. Lower yields on these bonds result in higher liabilities.

"The July rebound in equities provided much-needed relief for pension plans that had suffered through three consecutive months of falling assets and declining funded status," said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management. "Despite the strong July performance of the equities markets, the funded status for the typical plan is still 6.6 percentage points lower than it was at the beginning of 2010."

Austin noted that volatility remains a concern for U.S. corporate pension plans, adding, "Corporate plans continue to express interest in taking a more active approach to limit their exposure to wide swings in interest rates and portfolio returns. In particular, we are seeing plans build on their liability driven investing (LDI) strategies by setting deadlines to reach targeted funding levels. While the results in July were very welcome, they are also a reminder of the sensitivity of the markets and the challenges inherent in pension plan management."