{"id":423109,"date":"2026-01-22T15:17:08","date_gmt":"2026-01-22T15:17:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/423109\/"},"modified":"2026-01-22T15:17:08","modified_gmt":"2026-01-22T15:17:08","slug":"european-governments-turn-to-short-term-borrowing-as-pension-funds-retreat","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/423109\/","title":{"rendered":"European governments turn to short-term borrowing as pension funds retreat"},"content":{"rendered":"

Stay informed with free updates<\/p>\n

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European governments are curbing their sales of long-term sovereign bonds, as they shift towards shorter-term funding to limit the damage from a rise in borrowing costs.<\/p>\n

The average maturity of debt sold across big Eurozone markets including Germany, France and Italy is expected to dip below 10 years for the first time since 2015 this year, according to a Barclays forecast based on government issuance trends. In the UK, the bank expects an average maturity of roughly 8.8 years, the lowest this century.<\/p>\n

The figures underline how countries\u2019 debt managers are responding to waning appetite for long-term debt from traditional buyers such as pension funds. This month, the Netherlands completed a sweeping overhaul of its \u20ac1.8tn pension system that is expected<\/a> to sap demand for long-term debt. Economies such as the UK have also experienced shifts away from the defined-benefit pension systems that were once almost insatiable buyers of long-dated bonds. <\/p>\n

\u201cStructural demand has fundamentally changed,\u201d said Stephen Jones, global chief investment officer at Aegon Asset Management. \u201cYou\u2019ve removed the forced-buyer base and indeed begun to unwind it.\u201d<\/p>\n

The picture is a stark change from a decade ago, when European governments were rushing to lock in low borrowing costs by issuing ultra-long-dated bonds \u2014 sometimes not maturing for as much as 100 years. \u201cWe were at an extreme, the pendulum is swinging back,\u201d Jones said.<\/p>\n

Short-term borrowing is typically cheaper for governments, meaning they can cut their interest bill by eschewing long-dated issuance. However, relying on shorter maturities \u2014 something the US has done in recent years \u2014 leaves public finances more exposed to swings in interest rates as the debt needs to be regularly refinanced.<\/p>\n

But the gap between two-year and 10-year borrowing costs has widened sharply in the past two years in big European economies amid a global glut of issuance.<\/p>\n

\"Line<\/p>\n

April LaRusse, head of investment specialists at Insight Investment, said debt managers moving to shorten maturities were \u201ccoming to the rescue\u201d of countries dealing with a drop in demand for their long-term debt.<\/p>\n

Max Kitson, analyst at Barclays, said the scaling back of the maturity of sovereign debt issuance was in part a response to \u201cheavy volumes of issuance coming down the pipeline\u201d. Barclays forecasts a \u20ac100bn increase in gross debt sales across the EU sovereigns this year.<\/p>\n

A sell-off this week in Japanese debt has spread to bond markets around the world, in the latest sign of investors\u2019 worries over record borrowing by rich nations. <\/p>\n

The Eurozone market has also been transformed by Germany\u2019s landmark announcement last year that it would loosen its constitutional borrowing limit to make way for a huge increase in infrastructure and defence spending. <\/p>\n

The debt brake had created a shortage of the country\u2019s debt that had suppressed its borrowing costs and supported its status as the bloc\u2019s safest borrower. The \u201cscarcity of Bunds is definitely over\u201d, declared<\/a> the country\u2019s debt chief in June.<\/p>\n

German Bund yields \u2014 the benchmark for long-term government borrowing in the Eurozone \u2014 have climbed sharply since the spending plan, as investors brace for a surge in issuance as well as stronger economic growth. Its 30-year yields are hovering close to 3.5 per cent, levels not previously seen for more than a decade. <\/p>\n

Jason Borbora-Sheen, portfolio manager at investment manager Ninety One, said: \u201cSupply-demand dynamics are a key consideration for pricing government bonds, in particular with fiscal concerns increasingly influencing market behaviour.\u201d <\/p>\n

In the UK, the Debt Management Office\u2019s actions to cancel some auctions of long-term debt and announce a consultation on expanding the market for Treasury bills \u2014 debt maturing within one year \u2014 were a vital reason why the November Budget landed calmly with the market, investors argue. <\/p>\n

Matthew Amis, investment director at Aberdeen Investments, said that while the Budget had \u201ccalmed some nerves\u201d,\u00a0the DMO\u2019s actions were in his view the more important catalyst behind the recent outperformance in gilts.<\/p>\n","protected":false},"excerpt":{"rendered":"Stay informed with free updates Simply sign up to the Sovereign bonds myFT Digest — delivered directly to…\n","protected":false},"author":2,"featured_media":423110,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39],"tags":[28,147,530],"class_list":["post-423109","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/423109","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=423109"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/423109\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/423110"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=423109"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=423109"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=423109"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}