Dutch central bank confirms FTK on schedule
NETHERLANDS – The Dutch central bank has reaffirmed that the FTK, the new financial assessment framework for pension schemes, will come in as planned on January 1 2006.
There have been market rumours that the regulator would extend the deadline for the new regime, the Financieel Toetsingskader, amid increasing demand for longer-dated bonds which have seen yields tumble.
DNB spokesman Herman Lutke Schipholt said that the rumours were “totally untrue and not based on fact”. The DNB regulates pension funds and insurers.
Market participants have said there is a lot of speculative buying, in the form of hedge funds, of long-dated bonds.
The DNB denial comes as high demand for ultra-long eurozone government bonds have helped send yields on 30-year German paper to record lows.
“You can’t stick it all in bonds because there isn’t enough of them,” said Crispin Southgate, European credit strategist at Merrill Lynch. “There are enough bonds but they’ve all been bought,” he told a seminar last night.
“Watch the Dutch,” he said. He was referring to Dutch pension funds who he said have €500bn of liabilities and most of their fixed income holdings in five-year paper. They need longer duration stock, he argued.
A Financial Times report said pension funds and insurance companies have recently shown a “voracious appetite” for long bonds in the run up to stricter rules on matching assets with long-dated liabilities.
Both the UK and France have announced consultations on issuing longer-dated bonds.