US Pension Funds Cool Corporate Bond Demand as Funding Ratios Hit Record Highs

3 articles · Updated · Bloomberg · Jun 1

A key pillar of US corporate bond demand is weakening as company pension plans, now at record funding ratios, no longer need to buy as aggressively to match future liabilities.
A decade of strong equity returns helped close funding gaps that had plagued many plans when low interest rates made it harder to keep up with retiree obligations.
Rising yields then encouraged managers to shift gains into bonds, locking in funding for retirees while reducing portfolio risk.
With many plans now more than fully funded, that liability-driven buying is fading, removing a steady source of support for the corporate bond market.

With pension funds stepping back, who will absorb the record surge in corporate debt?

As companies transfer pension risk to insurers, are retirees' futures truly more secure?

Today's pension surplus is built on high rates. What happens when interest rates fall?