According to a recent research note from Deutsche Bank, the scale and timing of cash flows will be more important than a one-time surge in purchases.

The reform affects approximately €1.6 trillion in Dutch pension assets, which are transitioning from a defined-benefit to a defined-contribution system.

Funds representing more than a third of this amount are scheduled to complete the transition in 2026, primarily in the first half of the year.

Another approximately €930 billion is planned for 2027, and approximately €90 billion for 2028 or has no confirmed transition date, which, according to the report's authors, makes the overall process "rather biased toward the end of the period."

While the market's primary focus has been on long-term bonds and interest rate hedging, the report states that the reduced hedging of liabilities in the new system "should open the door to riskier budgets," with Eurobonds cited as one area for capital reallocation.

Dutch pension funds already have significant positions in Eurobonds, particularly investment-grade bonds, although the report notes that "there is no uniform reporting structure regarding the type of credit risk," making it difficult to accurately assess the allocation.

Using a scenario approach, Deutsche Bank describes potential inflows into Eurobonds associated with the allocation changes after the transition.

In the investment-grade Eurobond segment, the baseline scenario of an increase in allocation by 2-3 percentage points corresponds to inflows of €12-18 billion in 2026 and €19-28 billion in 2027. In the high-yield Eurobond segment, the baseline scenario for an increase of 0.5-0.75 percentage points implies inflows of €3-4.5 billion in 2026 and €7-9 billion in 2027.

When compared with expected bond supply, the brokerage found that the relative impact is greater in the high-yield segment. Based on the midpoints of its baseline ranges, Deutsche Bank estimates that pension reform-related inflows will account for just over 6% of the projected 2026 net supply in investment-grade Eurobonds and over 9% in high-yield Eurobonds.

However, the report states that "even in the high-yield Eurobond segment, where the relative impact is greater, the Dutch pension reform is unlikely to be a game-changer for spreads, particularly in 2026."

The brokerage repeatedly highlights the uncertainty surrounding how and when funds will deploy capital.

Pension flows are expected to differ from recent market patterns, noting that "unlike the huge yield-driven inflows that credit markets have become accustomed to over the past few years, pension flows will be more active and valuation-driven."

The absence of mandatory deadlines for reallocation to risky assets further reduces the likelihood of sharp buying pressure.

Deutsche Bank believes that demand related to pension reform will likely impact market stability rather than lead to further narrowing of spreads, describing it as "a more significant factor in curbing episodes of spread widening rather than exacerbating compression at already very tight levels."