Bond funds in the second pension pillar are grappling with negative interest rates. By law, they must invest conservatively and can’t buy risky bonds with higher yields. At the same time, they must turn positive yields and must use their own money to compensate clients for any negative yields. So far, the funds have been able to make positive yields, but in the long-term they can’t avoid losses.
Bond funds in the third pension pillar, as well as those of asset managers, are responding by buying risky bonds with ratings at the bottom of the investment scale, or without any rating. The central bank NBS has already pointed out the deteriorating quality of their bond portfolios.