A bigger round of Dutch pension transitions puts curve steepening back in play
The desk believes that the upcoming transition of over €900 billion in Dutch pension assets in 2027 sets the stage for a notable curve steepening in the EUR swap market. Per the full note from ING, the substantial asset transition reflects ongoing reforms within the Dutch pension system, moving from defined benefits to defined contributions. This shift is expected to exert upward pressure on the 10s30s curve, potentially yielding an increase of 10-20 basis points as the market reacts to this significant influx in longer-dated asset allocation demands.
What the desk is arguing
The desk contends that the impending transition of more than €900 billion of Dutch pension fund assets is likely to incite curve steepening in the EUR swap markets. Per the full note from ING, this transition amount far exceeds the €600 billion witnessed in 2026, hinting at a larger impact on the market dynamics as we approach 2027.
In 2026, the transition was well absorbed by the markets, which did not encounter turmoil, suggesting that a repeat of this smooth adjustment could occur. However, it’s important to note that last year, the notable effects were primarily felt in the second half of 2025, thus signaling that market participants should prepare for similar pressures over the coming months as the transition happens.
Where it sits in our coverage
Our current consensus target for EUR/USD is 1.075, while forecasts range from a low of 1.04 to a high of 1.12. Notably, jpmorgan is aligned with our view, targeting 1.10 for March 2026, perhaps reflecting similar expectations regarding curve movements driven by the Dutch pension transitions.
In contrast, bofa takes a contrary position, expecting a target of 1.04 for the same tenor. This divergence places our stance closer to the upper bound of the consensus range, indicating a bullish outlook amid notable market flows from pension transitions.
How other firms see it
Several firms, including jpmorgan and Citi, echo the desk's sentiment regarding potential curve steepening, emphasizing the importance of the upcoming Dutch pension asset transition. Conversely, firms like bofa and deutsche bank present a more cautious view, possibly anticipating volatility in the wake of these transitions.
Related currency pairs to monitor include EUR/GBP, which is sensitive to shifts in ECB policy and market sentiment linked to European fiscal reforms, and USD/EUR as it interacts with broader dollar dynamics influenced by policy direction from the Federal Reserve.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01€900 billion in Dutch pension assets expected to transition in 2027.
- 02Anticipated upward pressure on the 10s30s curve by 10-20 basis points.
- 03The transition reflects significant Dutch pension system reforms from defined benefits to contributions.
- 04Market reactions anticipated to mirror previous transitions in 2026.
Market implications
Traders should watch for shifts in the 10s30s EUR swap curve, particularly as we approach mid-2027 when these transitions are expected to exert their influence. Pay particular attention to the EUR/USD level as the moves unfold, potentially driving volatility in related currency pairs.
Risks to this view
A potential invalidation of this bullish outlook could emerge from unexpected changes in the ECB monetary policy stance or a significant deterioration in market sentiment that disrupts the asset transition process. If liquidity concerns arise, they could challenge the smooth adjustment predicted for the steepening curve.
Articles A bigger round of Dutch pension transitions puts curve steepening back in play 07:17 Rates Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download More than €900bn in Dutch pension assets are planning to transition in 2027, significantly more than the €600bn in 2026. Last year’s transition moved the 10s30s EUR swap curve by around 10-20 bp – and markets could start to feel similar pressure again in the months ahead Michiel Tukker A significantly larger amount of Dutch pension assets will transition in 2027 versus last year Markets digested the first batch well, but much more to come More than €900bn of Dutch pension fund assets should transition in 2027, which could start making a mark on longer-dated rates in the coming months. The transition of €600bn assets in 2026 went remarkably well without triggering market turbulence.
But reflecting on last year’s dynamics, we recognise that much of the market impact happened in 2H2025. As such, we think that, going forward, the 10s30s curve may see some 10-20bp of additional upward pressure over the coming months. To recap, Dutch pension funds are in the midst of massive reforms that broadly aim to transform the system from defined benefits to defined contributions.
Under the new framework, pension funds have greater flexibility to tailor portfolios by age cohort. As a result, we anticipate less need for longer-dated receiver swaps of 30Y and beyond. The demand for shorter swaps is likely to stay high or increase.
For younger participants, pension funds are likely to allocate more to equities, but for older participants, the demand for fixed income should be stronger. Significantly more pension assets are scheduled to transition in 2027 Source: ING, DNB, PensioenPro "> Source: ING, DNB, PensioenPro When we look at transaction data from the first quarter of the year, we see that bonds were still in high demand, especially when compared to equities. In 1Q26, Dutch pension funds bought around €19bn in debt securities, versus selling some €10bn in equities.
At first glance, this pattern suggests that the increased demand for fixed income for older cohorts exceeds the additional equities for younger participants. Unfortunately, we do not have a breakdown between those funds that have already transitioned and those that are still scheduled to. Bonds still in high demand in the first quarter of 2026 Source: ING, ECB, Macrobond "> Source: ING, ECB, Macrobond When looking at demand for Dutch government bonds (DSL) specifically, we see a remarkable pickup in 1Q26, reflecting a continuation of a strong home bias.
The uptick is most evident in the 10Y+ maturity bucket of DSLs, which is not wholly unsurprising. We previously estimated that the demand for duration with maturities of 10Y to 20Y will remain strong, if not stronger. In market pricing, we have seen the spread between DSLs and Bunds narrow further.
A 10Y DSL trades at just 10bp above Bunds. Going by the healthy demand for DSLs from Dutch pension funds (and increasing issuance in Bunds) we could see this trend extended. Strong demand for Dutch government bonds in 1Q26 Source: ING, DNB, Macrobond "> Source: ING, DNB, Macrobond We estimate a 10-20bp steeper EUR swap curve on the back of the reforms Whilst the market impact from the transition in 2026 may not be immediately obvious, we estimate the 10s30s steepened by an additional 10-20bp.
The 10s30s EUR curve steepened significantly during the second half of 2026, much more than the dynamics of the 5s10s would have predicted (left chart). But at least part of this can be retraced to spillovers from the USD 10s30s curve (right chart), which steepened significantly over this period. Even after correcting for both, we still observe a level shift of around 10-20bp.
Also of interest is that the seemingly crowded 10s30s EUR steepener trade faced a painful shakeout in March 2026, resulting in a more aggressive flattening than would otherwise be expected. Nevertheless, markets seem to be stabilising again at a relatively steeper 10s30s than before. With even more assets scheduled to transition in 2027, we think the curve could see similar steepener pressures as in the second half of 2025.
Speculative flows might be more limited this time round, however, as the March sell-off suggested a crowded trade. Meanwhile, we do think many pension funds will likely start preparing for the transition date by already rebalancing their portfolios from longer to shorter maturities in the coming months. EUR 10s30s curve still seems 10-20bp steeper when correcting for other factors Source: ING, Macrobond "> Source: ING, Macrobond Rates Pension funds Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Michiel Tukker Senior UK & Eurozone Rates Strategist Michiel Tukker is a Senior UK & Eurozone Rates Strategist based in London. Before ING, he worked as a quantitative economist for the Dutch central bank, at BlackRock in its Financial Markets… In this article Markets digested the first batch well, but much more to come We estimate a 10-20bp steeper EUR swap curve on the back of the reforms
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