Natural Buyers? Pension Funds and Treasury Exposure
By Aleksandar Andonov, Kristy Jansen & Joshua D. Rauh
Long-maturity Treasury issuance reduces government rollover risk but depends on investors with structural demand for duration. We examine whether U.S. public pension funds, a $7 trillion sector, provide such demand, as is often presumed given their liabilities. Using security-level holdings, we show that Treasuries account for only 6% of pension assets and that total Treasury exposure, including derivatives, has a maturity of 8.0 years, only 1.3 years longer than marketable Treasury debt. Pension liability structure has little explanatory power for allocations or maturity choices. Overall, U.S. public pension funds provide limited structural demand for long-maturity Treasury exposure, suggesting that long-term liabilities alone are insufficient to generate substantial demand.
Source SSRN
