Just when you thought...
GoSeigen wrote:The folk narrative appearing in this thread (and also repeated in the FT article) of gilt yields being driven down by pension fund buying is bogus. Buying an asset does not in itself drive the price anywhere. One might as well say that the enormous issuance of gilts over the same period has driven down yields. Such a statement is self-evidently nonsense and the one about pension funds, attractive as it is to a neophyte, makes as little sense.
Well, some of the "neophytes" are, we are given to understand, insiders and people who 'know', allegedly. (Also, the explanation wrt
recent events included pension funds selling Gilts etc.)
GoSeigen wrote:Gilt yields have fallen for the simple reason that buyers increasingly were comfortable with a lower yield and sellers (both the issuer and secondary market participants) naturally were happy to sell at increasingly low yield.
Is not this no more than the correct, full description of what people mean when they casually say financial products are being "
sold down" etc? i.e. it is just a simple shorthand for what is happening? (Somebody usually pops up to point out that "
if people are selling somebody else must be buying" etc.)
Then there is this, from above:
UK pension schemes reach record collective funding level- PwC UKhttps://www.pwc.co.uk/press-room/press-releases/uk-pension-schemes-still-reach-record-collective-funding-level.html"
The UK’s 5,000-plus corporate defined benefit (DB) pension schemes are now estimated to have sufficient assets to ‘buy out’ their pension promises with insurance companies, according to a new analysis from PwC. Last week’s unprecedented levels of interest rate volatility presented operational challenges for pension schemes that employ ‘liability-driven investment’ (LDI) strategies. However, when looking at the full picture of both assets and liabilities, the funding status for most pension schemes is at a strong level."
Sufficient assets for a "buy out"! That is surely well above normally required continuing DB pension schemes 'funding levels'. So, if true, what is the problem?
On the face of it the above appears to fly in the face of the understanding arrived at in the thread above. Or is it possible to reconcile this PWC report with the previous understanding of LDI?
Years ago, on TMF, I once said something like: "
I have concluded everything I read about pensions is wrong"
Perhaps time to resurrect that idea?
![Smile :)](./images/smilies/icon_e_smile.gif)