The Dutch pension reform looks set to cause seismic shifts across € swap curves amid structural long-end flows. With the latest data that became available for Q2 it is eyecatching that the market value of the hedges increased despite an increase in the 20y discount rate, while the overall moves have been relatively small. We have further refined our analysis to include changes in EUR/USD as a proxy for the FX forward valuation change in our linear regression model of Dutch pensions’ derivatives positions.

Furthermore, we analyse the transition progress, show new DV01 estimates of the pension funds’ IRS and bonds, and conclude that long-end steepening looks set to resume early next year.