POBs—Set to Make a Comeback?

Pension obligation bonds (POBs) were all the rage in 2021 as a result of historically low U.S. interest rates. This provided public pension systems and their sponsors with a historically unique opportunity at possible interest savings. While issuance in 2022 fell off due to interest rate volatility, and despite the aggressive action on the part of the U.S. Federal Reserve, long-term U.S. interest rates are up only marginally from where they were one year ago and may be coming down further over the next few years. As a result, POBs may be increasingly considered by governmental employers going forward. This panel of industry experts brings together points of view from many angles, including those of the plan sponsor, actuary, rating agency and investment manager.

Key Takeaways:

• What is the current environment for POBs relative to the last couple of years?

• What are the benefits to a pension system when issuing a POB?

• How does a POB change actuarial assumptions?

• Does investing the POB proceeds into the current asset allocation make sense, or is there a different approach that should be considered?