It seems like the whole world is fleeing from Spanish debt, but there is one exception. Spanish pension funds are buying it up. According to recent data published by the Directorate General of Insurance (DGS following the Spanish acronym), pension funds increased their exposure to Spanish fixed income but no other products.
Specifically, they increased allocations of these shares from 37.1% to 47% or from 31.850 euros to 39.458 million euros. Expressed as a percentage increase, the asset allocation increased by 24%. In contrast, the pension funds reduced their investments in other assets, shaving treasuries and stocks for the most part.
The big question is, what portions of the fixed income debt is private versus public? The DGS has not publicized the answer to this question, although pension fund data from Inverco may provide a clue about the direction that fund managers are leaning as they overhaul their portfolios.
According to Inverco´s data, at the end of 2011 fixed income products (note, not all funds offered a breakdown of their portfolios) owned 19.945 billion euros in Spanish national debt compared to 16.343 billion euros at the end of 2010, a net increase of 25%. As a comparison, investments in private fixed income have gone from 16.359 billion euros to 16.019 billion euros in the same time frame.
The other big uncertainty is whether this increase in fixed income exposure is due to sales of Spanish treasuries or, perhaps, to portfolio revaluations that were done as a consequence of a rebound in the price of these assets. In this respect, and taking into account the fact that ten-year bond yields, which fall when their prices rise, contracted minimally from 5.45% to 5.08%. It looks like both yields and buying were low.
