Regulatory Outlook | 07.14.21
Biden’s Pension Rescue Seen as Bigger Help for Corporate Bonds
President Joe Biden’s planned pension rescue could result in even more money being shunted into investment-grade corporate bonds than previously thought, according to Citigroup Inc. strategists. The Pension Benefit Guaranty Corp., which insures pensions, issued rules on Friday for bailout money for multi-employer plans that are severely underfunded. These plans can apply for rescue funds as part of the $1.9 trillion pandemic-relief bill signed into law in March. The government agency said it is limiting the types of investments the pensions can make with the rescue funds to individual investment-grade fixed-income securities, or funds such as exchange-traded funds or mutual funds. That increases the “likelihood that funds are channeled” into high-grade bonds, Citi's Daniel Sorid and James Keefe wrote in a note late Friday.
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