Up to recently, many observers expected a shift from corporate bonds to government bonds due to differential capital charges, LDI strategies, and the need to limit duration gaps. However, current unease about sovereign risk could mitigate this trend. Within corporates, the industry has been clearly reducing exposure to financial institutions, except for covered bonds.
4  BIS central bankers’ speeches  The fourth issue concerns the role of insurers and pension funds as global providers of longterm risk capital. These institutions found it difficult to play this role during the crisis, due to extreme market pressure and volatility. But steeper risk charges will also make it costlier to hold long-term risky/illiquid assets in the future.