The Treasury market collapse has created a crisis for institutional investors, with corporate pension plans seeing their funding ratios plunge by 9 percentage points in just one week. The damage stems from:
- Discounted liabilities: Higher rates reduced obligations by 420B
- 720B in value
- Derivative exposures: Interest rate swaps magnified losses
“Many plans are now underwater after years of progress,” said Milliman’s Zorast Wadia. The math:
✓ Average funding ratio fell from 98% to 89%
✓ Aggregate deficit grew to $210B from surplus
✓ Hedge fund liquidations spiked 300%
Key consequences:
→ Forced equity selling to meet margin calls
→ Actuarial assumptions needing revision
→ Potential benefit cuts for some retirees
