Brian Chappatta, Columnist

Bond Tantrum Has Big Silver Lining for Pensions

Higher interest rates will keep defined-benefit plans on track to fully meet their future obligations.

March 2, 2021 at 11:30 AM UTC

Brian Chappatta is managing editor of Bloomberg News' leveraged finance and distressed debt teams. He was previously managing editor and team leader of its wealth group. Before that he was a Bloomberg Opinion markets and finance columnist and a bonds reporter for Bloomberg News.

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Photographer: Chris Ratcliffe/Bloomberg

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As is often the case with large market swings that evoke the specter of a “regime change,” it’s only a matter of time before pension-fund behemoths enter the conversation to quiet the hysteria. It makes sense: Defined-benefit plans are tasked with seeing through intermittent noise and focusing on longer-term trends that will influence their ability to make promised payments to retirees.

In Australia, at least, large investors aren’t buying the new narrative on resurgent inflation. “‘Markets Are Wrong’: $2 Trillion of Pension Funds Skip Bond Rout,” Bloomberg News’s Ruth Carson and Matthew Burgess wrote, based on interviews with five pension funds that help oversee parts of Australia’s A$2.9 trillion ($2.3 trillion) in retirement assets. The price-growth question is framed in terms of its implications for more than $46 trillion of pension assets globally.