US - July funding ratios in typical US pension funds gained 0.6% because liabilities fell 1.4% compared to the 4.8% decline in funding ratios last month, according to a BNY Mellon Asset Management report released Wednesday.
Dave Chittim, senior vice president of BNY Mellon Asset Management, said market concerns stemmed from lack of confidence among institutional investors, not the regular 'mom and pop' investors, especially when it came to pension funds, which were a "substantial part of worldwide investments" and "tend to be a pretty big mover of the markets".
"Even though markets are down pretty strongly so far this year - stocks are down 12% or so, corporate bonds are down - that's the bad news. The good news is that what's on the offset - the liabilities of pension funds - those are also down. That alleviates some of the pain, but it's really anybody's guess how long it will take to alleviate investors' concerns," Chittim added.
Peter Austin, executive director of BNY Mellon Pension Services, said funding volatility would persist despite this month's "significant improvement".
"While Treasury bonds were mixed during July, yields on high-grade corporate bonds increased and spreads were 19 basis points wider as investors continued their flight to quality. [But] corporate spreads remain extremely wide, and as the markets begin to settle and corporate spreads narrow, we may see a further decline in funding ratios," he added.
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