UK – Barclays Capital has called for a closer link between the pension fund and housing mortgage markets in the UK.
“It would be nice if the mortgage market and the pension fund market married up,” said John Maskell, head of European rates strategy at Barclays Capital. He cited the examples of the US and Denmark where pension funds buy mortgage bonds.
“What the government should be doing is unifying that part of the balance sheet,” Maskell told a briefing, pointed out the two segments occupy different points on the yield curve.
And he argued that retirement assets in the UK should be looking at investing in infrastructure as a way of dealing with long-term liabilities. “Pension funds should definitely invest in these long-run infrastructure projects.”
In April the UK’s Debt Management Office said pension funds and insurers were probably buying long-dated bonds in order to match their liabilities. A spokesman said the DMO listens to pension industry calls for longer-dated bonds to match liabilities.
Maskell’s comments came as Barclays unveiled its 2004 analysis of the AAA covered bonds market. He said this market is increasingly being seen as an alpha product by pension funds. He cited MN Services, Norges Bank and ABP.
“These assets are justifiably seen as viable alternatives to governments,” he told the briefing.
Barclays forecasts the 888 billion-euro market will double within 10 years. “The expansion in the European residential mortgage market is causing tremendous growth in the covered bond sector,” Maskell said.