From Barclays’ Christophe Boulanger and Dominik Winnicki on the pension deficit risk building in QE’d Europe:
Continue reading: The pension hole in European corporatesAs evident in the end-June 2016 corporate results, the rise in pension benefit obligations (PBOs) and pension deficits is a broader theme for European corporates. Overall, pension deficits for the more-than 100 companies that we have screened are up 16% since endFY2015 and are likely to increase further in the July to December 2016 period given the continued fall in discount rates on the back of declining long-term yields that are not offset by returns on plan assets.
More importantly, we believe that such a trend is unlikely to improve in 2017 given quantitative easing policies (QE) by the European Central Bank and the Bank of England that will likely keep corporate yields low in the medium term.