Yield-Curve Flattener Bets Face Rare Challenge on Pension Demand (Bloomberg)
Bloomberg Aug 13, 2018
The flood of money from Americaâ€™s $3 trillion corporate pension pool into the long end of the Treasuries market could slow next month. But investors should be wary of betting on a sea change in the curveâ€™s flattening trend, say Wall Street rates strategists.
U.S. companies have until the middle of next month to claim deductions for pension fund contributions at a 35 percent rate, before it drops to 21 percent as a result of corporate tax cuts passed in December. Front-loading to beat the deadline is said to have fueled buying in long-dated bonds, helping drive the curve to the flattest since 2007. The prospect for softer demand, combined with surging coupon supply, presents a rare opportunity for the curve to steepen.