As interest-rate jitters supercharged a meltdown in the world’s biggest bond market, Sam Sicilia barely blinked.

“The markets are wrong” about inflation expectations, said Sicilia, chief investment officer of the A$56 billion ($43 billion) Host-Plus Pty pension fund in Melbourne. “Deflationary forces are bigger. Interest rates are going to stay at effectively zero.”

With governments around the globe still adding to trillions of dollars of stimulus to ride out the pandemic, pension fund managers who are trying to discern the long-term effects are posing the question: Will inflation make a comeback? If it does, more than $46 trillion of global pension assets would be affected as central banks pivoted toward sustained higher interest rates.

Interviews with five pension funds that help oversee parts of Australia’s A$2.9 trillion ($2.3 trillion) in retirement assets reveal a rank of investors largely unconcerned about the risk of rising prices.

Last week, bond trades triggered speculation that inflation may accelerate to multi-year highs as the inevitable conclusion to the world’s $19.5 trillion coronavirus rescue package. Yields on 10-year Treasuries surged to pre-pandemic levels on Thursday, convulsing markets from stocks to credit as traders bet on more aggressive tightening — with a U.S. interest rate hike briefly priced in for late 2022, at least a year earlier than the Federal Reserve had signaled.

Debt markets calmed on Monday, as investors bet central banks would ramp up asset purchases to prevent yields rising too quickly.

“I don’t think they would want to risk any recovery” by allowing markets to tighten too quickly, said Michael Clavin head of fixed-income at the A$140 billion Aware Super, Australia’s second-biggest pension fund by assets. There may be a “burst of inflationary data, but we’re not really sure it’s sustainable.”

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