Negative Rates Can Do a Lot More Damage Yet: Nordic Warning
After half a decade of negative interest rates, one of the biggest Nordic pension funds is wondering whether this is just the beginning.
The head of investments at Finland’s Ilmarinen Mutual Pension Insurance Co. says his industry is “just starting to see what kind of new challenges [negative rates] will cause.”
That means “we are just taking the first steps” in portfolio adjustments, Mikko Mursula said in an interview in Helsinki. He says reality hit after the summer, when it became virtually impossible to get government bonds at positive yields across most of the euro zone.
The steps he’s taken so far have led away from easy-to-sell assets, as liquidity becomes a luxury of a bygone age. It’s a way to preserve returns, but also means the pension industry is delving into much murkier asset classes that might prove hard, or very time-consuming, to offload if markets turn.
Euro-zone rates first went below zero in 2014. That’s two years after Denmark, which has had negative rates longer than any other country. Swedes have been living with the policy since 2015.
According to the ECB, accommodative monetary policy is still needed as growth in the single-currency area slows.
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