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S&P Global Releases Report on Increasing Pension Obligation Bond Issuances in 2021

On October 14, 2021, S&P Global Ratings released its report, Pension Obligation Bond Issuances Continue to Increase in 2021. The report indicates that the issuance of U.S. pension obligation bonds (POB) and other postemployment benefit (OPEB) obligation bonds (OOB) is increasing.

In the U.S. Public Finance sector (USPF), POB issuance has accelerated in the current low interest rate environment. From January 1, 2021 to September 15, 2021, S&P Global rated 64 new POB issuances in the USPF sector which totaled about $6.3 billion, up 113% from $3.0 billion issued in calendar year 2020.

The key findings include:

  • The primary factors driving POB issuances consist of a favorable interest rate environment and issuers’ challenge to control the escalation of pension contributions;
  • The main credit concerns for issuers focus on market returns falling short of expectations and pension contribution increases creating budgetary constraints; and
  • Obligations that intend to address pension liabilities may come in different forms, but have similar credit risks.

The report is available here.