Live Markets: How Dutch pension funds will avoid disorderly bond selloff

Raiffeisen Bank International AG

03/10/2025 10:12

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HOW DUTCH PENSION FUNDS WILL AVOID DISORDERLY BOND SELLOFF

The overhaul of Dutch pension funds is emerging as a key driver of rising ultra-long bond yields, as the new framework reduces the need for retirement schemes to hedge long-term liabilities with long-duration assets.

Reduced demand for 30-year bonds pushes prices lower and yields higher, contributing to a steepening of the yield curve.

“Talk about transition delays and position squaring of hedge funds ahead of year-end has contributed to ultralong flattening in recent weeks” says Christoph Rieger, head of rates and credit research at Commerzbank.

“The curve remains under the spell of Dutch pension fund speculation,” he adds.

The gap between 30-year and 10-year German government bond yields was at 56 basis points on Friday. It hit 63.48 bps in early September, its highest since July 2019.

ING’s rate strategist Michiel Tukker recalls that Pensioenfonds Metaal & Techniek (PMT), the third-largest Dutch pension fund, confirmed on Thursday its ambition to transition on 1 January 2026, triggering a knee-jerk steepening of the 10s-30s curve.

PMT previously shared plans to unwind its excessive interest rate hedges over a period of six months, reducing the immediate market impact.

“We still believe funds will try to unwind their excessive hedges as soon as possible to prevent rates rising against them,” argues Tukker.

“But as PMT’s approach also demonstrates, we don’t expect a disorderly sell-off.”

(Stefano Rebaudo)

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