10.16.26
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Are Cracks Forming?

By: Russ Kamp, CEO, Ryan ALM, Inc.

On September 30, 2026, I wrote my first post regarding my concerns about capacity within the AI trade, as hyperscalers and other businesses associated with AI and data center buildout were rapidly seeking financing through the credit markets. Since that post, I’ve produced one additional update as well as track daily developments in the credit markets that might impact not only Ryan ALM’s business, but bonds/spreads in general.

I’m taking the time to write today because there has been a meaningful development, and this may be the clearest credit-market warning I’ve seen since I began tracking the AI buildout.

The critical development is CoreWeave’s bond selloff. CoreWeave is a publicly traded cloud-computing company built specifically around GPU-intensive AI workloads rather than the general-purpose cloud model of AWS, Azure or Google Cloud. It provides GPU computing, storage, networking and software used to train and run large AI models.

Here’s the story. CoreWeave issued bonds in June at a yield of roughly 9.7%, which are now yielding around 15%! Reuters describes the move as a test of the market’s willingness to continue financing highly leveraged AI infrastructure and says investors are increasingly questioning whether future cash flows justify the debt required to build it.

And CoreWeave isn’t an isolated indicator. Data-center bonds associated with projects backed by major AI participants, including Meta Platforms, Oracle and Microsoft have fallen below par as investors reassess leverage, project the potential economics of these buildouts, and the enormous amount of financing still required.

Demand for the physical infrastructure remains extremely strong. Schneider Electric reported triple-digit data-center demand growth today and raised its 2026 forecasts again; Q3 organic revenue increased 16.9%. So this is not evidence that demand for AI capacity has suddenly disappeared. It is, however, evidence that investors are becoming less willing to finance that capacity at almost any price, and rightfully so.

For AI equities, I would consider this a genuine warning signal. Companies dependent upon repeated external financing should now be valued very differently from cash-generative hyperscalers. CoreWeave’s shares are down about 15% this week even as the underlying demand story remains strong.

For bonds, we’re seeing the beginnings of exactly the differentiation that we anticipated. A 15% yield represents substantial credit, refinancing, and execution risk. If this repricing spreads from “neoclouds” into SPVs and data-center project debt, the marginal cost of AI capital could rise substantially.

For data-center real estate, this adds a second scarcity test to the one we’ve been discussing. A project increasingly needs both secured power and secured economical financing. Having electricity but needing 12%–15% debt doesn’t necessarily produce an economically viable data center.

10.16.26
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Just Because You Can, Doesn’t Mean…

By: Russ Kamp, CEO, Ryan ALM, Inc.

On Wednesday of this week, I produced a blog post highlighting the dramatic improvement in the Pension Benefit Guaranty Corporation’s (PBGC) financials. I questioned why the premiums paid by both private pensions and mutliemployer pensions needed to be so high given the current strength with a >$64 billion surplus. Furthermore, I considered that these premiums have gone from being a necessity to a burden today. That burden is one contributor to DB pension plans continuing to be frozen, terminated, and the liabilities eventually transferred to an insurance company.

Well, wouldn’t you know. Just yesterday I read that the PBGC has raised the premium rates applicable for plan years beginning in 2027, which they announced on Oct. 14. Those rates were increased in accordance with the indexing rules provided in Section 4006 of ERISA. Just because they can raise those premiums based on Section 4006, should they? Here are the details from the PBGC.

Rates for Single-employer Plans

Per-participant rate for flat-rate premiums. The per-participant rate for flat-rate premiums will be $116 for 2027. The increase in this rate for 2027 are comparable to those the PBGC set for 2026 compared to 2025, as well as those it set for 2025 compared to 2024 and for 2024 compared to 2023. And as with those other years, the increases from 2026-2027 are generally substantially below the increases in the rates from 2022 to 2023. For all those years, the PBGC increased this premium by $5 from year to year.

Per-participant cap. The per-participant cap for 2027 is $783, $32 higher than that the PBGC set for 2026. That’s a slightly smaller increase than the $34 increase from 2025 to 2026, but bigger than the $31 increase from 2024 to 2025.

The premium rate per $1,000 in unfunded vested benefits (UVBs). The last time this rate has increased was from 2022 to 2023; since then, it has been $52 and will be at that rate for 2027 as well.

Rates for Multiemployer Plans

The per-participant rate for flat-rate premium for multiemployer plans increased by much smaller amounts and the rate per $1,000 in UVBs for single-employer plans stayed the most stable. The per-participant rate for flat-rate premiums for 2027 will be $42, a $2 increase over the 2026 rate. This PBGC has increased this rate by $1 to $3 ever since 2018.

Indexation

For 2019 and earlier years, the PBGC premium rates and the variable rate premiums (VRPs) were not indexed; from 2020-2023, all premium rates and the VRP cap were subject to indexing. Starting in 2024, indexing of the VRP rate stopped; however, all other premium rates and the VRP cap still are indexed.

Again, just because they can increase rates, does it mean that they should? The PBGC should not be a profit center. Yes, markets go up and down and surpluses can be impacted, but a $64 billion surplus seems extreme, especially if the burden of supporting a DB plan becomes more challenging. We need DB pension plans, as asking the American worker to fund, manage, and disburse a “retirement” benefit through a DC offering is just silly given their lack of disposable income, investment acumen, and NO crystal ball to help with longevity. We can and should do better as a pension industy.

10.14.26
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PBGC Premiums: Helpful Or A Burden?

By: Russ Kamp, CEO, Ryan ALM, Inc.

I’ve written often about the demise of the traditional defined benefit pension plan. We’ve gone from a retirement system in which employers provided workers with a monthly benefit for life to one in which employees are increasingly expected to fund, manage, and then disburse their own retirement benefit. There are many reasons for this transformation. But here’s one that deserves much more attention: Have PBGC premiums helped accelerate the demise of the pension plans the PBGC was created to protect?

The Pension Benefit Guaranty Corporation (PBGC) was established by ERISA in 1974 to protect the retirement incomes of participants in private-sector defined benefit plans. That is an incredibly important mission. But protecting pension promises requires pension plans to exist in the first place. Unfortunately, the cost of maintaining a traditional pension has increased dramatically, and I believe that PBGC premiums have become part of that burden.

Consider what has happened. In 2012, the flat-rate PBGC premium for a single-employer plan was $35 per participant. By 2026, it is $111. Even more significant is the variable-rate premium assessed on underfunded plans. That charge has risen from $9 per $1,000 of unfunded vested benefits in 2012 to $52 today. In other words, before considering the participant cap, an employer can effectively pay an additional 5.2% annually on its unfunded vested pension liability simply for the privilege of continuing to sponsor the plan.

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Since 2012, consumer prices have risen approximately 47%. Over the same period, PBGC’s flat-rate premium has increased 217%, while its variable-rate premium has increased 478%.

Suppose an employer has $100 million in unfunded vested benefits and isn’t constrained by the per-participant cap. The variable-rate premium alone could theoretically amount to roughly $5.2 million per year. That money doesn’t improve the plan’s funded status. It doesn’t purchase bonds to secure future benefit payments (cash flow matching). It doesn’t generate investment income for the pension trust. And it doesn’t pay a retiree’s monthly pension benefit. It goes to the PBGC.

I’m certainly not suggesting that PBGC premiums are solely responsible for the decline of defined benefit plans. They aren’t. Accounting changes, funding volatility, investment risk, interest-rate movements, longevity risk, regulatory complexity, and the introduction of defined contribution plans have all contributed. Furthermore, the decline in private-sector DB plans began long before today’s higher premiums existed. But those increases have not helped sponsors maintain DB plans.

Interestingly, the PBGC’s single-employer insurance program is no longer in the precarious financial condition that originally helped justify dramatic premium increases. In fact, the PBGC now enjoys a $64.9 billion surplus as of the end of fiscal year 2025, including a $62.2 billion surplus for private pension plans. Wow! Yet employers maintaining DB plans continue to face substantial and ever increasing premiums. We should at least be asking whether those premium levels remain appropriate.

The PBGC was created to protect pension promises. That’s a mission I strongly support. But if the cost of that protection contributes to employers deciding they no longer want to provide those promises, we have a problem worth discussing.

10.13.26
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Why Wait To Buy That Security?

By: Russ Kamp, CEO, Ryan ALM, Inc.

As I’ve mentioned before, I like getting responses to the many blog posts that I publish. A recent response to the possible use of Cash Flow Matching (CFM) was “My plan has a 10+-year duration. We are not close to using CFM”. Thanks for the observation. Here’s what I’d say to that:

I wouldn’t view a 10+-year duration for a pension plan as either unique or one that is “not close” to using cash flow matching. Duration strategies and CFM address two very different purposes. A plan’s duration tells us something about the interest-rate sensitivity and timing of the pension plan’s liabilities. It doesn’t tell us whether those promised benefits should begin to be secured today, especially given the higher interest rate environment.

For Ryan ALM, the more important question is “What is the plan’s funded status/funded ratio”? If a plan has sufficient assets to secure a meaningful portion of its future benefit payments, why would a pension plan wait simply because the liability duration is 10+-years? Importantly, CFM DOESN’T require matching the entire liability stream or waiting until a plan is closed, frozen, or very mature. A plan can establish a CFM portfolio today that secures, for example, the next 5-, 10-, 15-, or more years of projected benefits and expenses, while the remaining assets continue to pursue growth to meet future liabilities. As an FYI, we have multiple 30+-year assignments.

Furthermore, many pension plans have negatively impacted the liquidity available to meet the monthly obligations through asset migration to non-public investments. CFM dramatically improves a plan’s liquidity profile. A duration strategy doesn’t provide liquidity!

We’d suggest that the better funded a plan becomes, the stronger the argument may be for taking some risk off the table, especially during these highly uncertain times. Funding improvement/security represents progress toward fulfilling the pension promise. CFM allows the sponsor to secure and monetize some of that progress by converting assets into contractual bond cash flows designed to meet those future benefit payments.

Finally, if the desire of the pension plan sponsor is to mitigate interest rate risk, CFM provides a superior duration match since every month of the assignment is duration matched. So, a 10-year CFM mandate would have 120 bespoke duration matches as opposed to an “average” duration or a few key rates matched along the Treasury yield curve.

Rather than observing that a pension plan with a 10+-year duration means that plan isn’t ready for CFM, I would counter with; “Why wouldn’t a plan sponsor want to secure a portion of the promises where a plan could improve liquidity, secure benefits, reduce the cost of those future benefits, and extend the investing horizon for the residual assets to grow unencumbered?”

Keep the questions and observations coming. Thank you.

10.12.26
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ARPA Update as of October 9, 2026

By: Russ Kamp, CEO, Ryan ALM, Inc.

Good morning. One of the perks of being involved in bonds is the fact that October 12, 2026 is a federal holiday and the bond market is closed, as today you are celebrating either Columbus Day or Indigenous Peoples’ Day. Enjoy. Stock markets on the other hand remain open and they are operating on a normal schedule.

Regarding ARPA and the PBGC’s implementation of this critical pension legislation, two plans received approval for Special Financial Assistance (SFA), while another two were given permission to submit an application seeking an SFA grant.

Local 1814 Riggers Pension Plan and Pension Plan of International Union of Bricklayers and Allied Craftworkers Local #15 Pennsylvania received approval for their revised applications. Local 1814 will receive $2.9 million for its 65 members, while the Bricklayers and Craftworkers will get $6.5 million for the 165 participants in that fund.

There are now 42 applications before the PBGC, including UFCW Local 174 Commercial Pension Fund Plan and Local 87-Distributors Pension Plan, that are hoping to secure a combined $28.3 million plus interest and FA loan repayments for just over 1,300 participants.

IN the PBGC’s weekly update they did not identify any funds withdrawing or denying applications and there weren’t any funds seeking to be added to the current waitlist. The last fund being added was in August 2026.

Fortunately, U.S. interest rates remain elevated. The pension plans that have recently received or those that will soon get SFA are going to benefit from these higher levels, as the future value of benefits to be paid will be reduced significantly. We recently produced a 30-year defeasement that had a 6.5% YTM. When ARPA was first approved (March 2021), U.S. rates were at historic lows. The cost to secure those promised benefits was far greater than it is today.

10.09.26
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Ryan ALM, Inc. Q3’26 Newsletter

By: Russ Kamp, CEO, Ryan ALM, Inc.

We are pleased to share with you our insights and perspectives on the relationship of pension assets to pension liabilities (benefits and expenses) through the Q3’26 Newsletter. As you will read, the third quarter produced robust growth for pension funding, as liabilities collapsed due to a significant rise in U.S. interest rates (discount rate). As a result, funded ratios are at a high point since we began our analysis back in 2000. We believe that now is the time to take risk out of your asset allocation by securing a portion of the plan’s liabilities through cash flow matching (CFM).

As always, we encourage you to reach out to us with any questions or observations. Thank you for taking the time to read our insights, which we hope will prove useful.

10.08.26
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As If The Price of Oil Wasn’t Bad Enough – Shipping Costs!

By: Russ Kamp, CEO, Ryan ALM, Inc.

The cost of transporting crude oil has exploded, adding another significant inflationary pressure to the global energy supply chain. Hiring a Very Large Crude Carrier (VLCC) to move U.S. oil to Asia now costs roughly $77 million, compared with an average of just $9.2 million in 2025. That is an increase of nearly 740%. As a FYI, VLCCs are among the largest oil tankers in commercial service, typically carrying around 2 million barrels of crude oil.

The important point isn’t simply the cost of the tanker. Transportation is part of the delivered cost of crude oil, so this extraordinary increase will ultimately be absorbed somewhere along the supply chain by producers, refiners, distributors, and/or consumers.

As I’ve mentioned in many blog posts when discussing inflation, this is particularly important because the Fed’s action to raise interest rates does little to solve this problem. The Fed can restrain demand, but it cannot manufacture tankers, increase shipping capacity, reopen constrained/blocked shipping routes, or reduce geopolitical risk. This is another example of supply-driven inflation, rather than excessive consumer demand.

Furthermore, there is potentially an important lag in its effect on the U.S. economy. Even if crude oil prices stabilize or fall, dramatically higher transportation costs can continue working their way through producer prices and ultimately consumer prices. That makes tanker rates another factor worth watching alongside the prices of oil, diesel, and gasoline on inflation expectations and potentially higher U.S. interest rates. Is the current energy shock becoming embedded in broader U.S. inflation? If so, a Fed Funds rate increase of >25 bps will be absolutely necessary.

10.08.26
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Corporate Pension Funding Rockets Higher

By: Russ Kamp, CEO, Ryan ALM, Inc.

The Milliman 100 Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans, was recently released. It isn’t surprising that the average funded ratio advanced nicely during September given the dramatic rise in U.S. interest rates.

As a result, the funded status of the Milliman 100 PFI plans rose by $19 billion during September on the back of a 47 basis points (bps) rise in the discount rate, which now stands at 6.47%. This dramatic rise reduced pension liabilities by $54 billion. This reduction in the total liabilities offset investment returns that fell -2.2% for the month. According to Milliman, this challenging performance was the second-worst month of 2026, following the -3.19% return posted in March. The funded ratio for the index members is now at 114.5%, up more than 5% from 109.4% established at June 30, 2026.

“Despite losing $59 billion in market value during the third quarter, driven by quarterly returns of -2.92%, this performance was more than offset by a $105 billion reduction in plan liabilities, as discount rates rose 86 bps during the period,” said Zorast Wadia, PFI author. “Discount rates have not approached current levels since the 6.53% seen in May 2009, and the PFI funded ratio has not reached similar highs in more than 25 years.”

Given this dramatic improvement in funding, corporate defined benefit funds would be remiss to not seek to defease pension liabilities and secure that funding. As reported in the Ryan ALM, Inc. blog yesterday, we constructed a cash flow matching portfolio using high-quality investment-grade bonds (BBB+ or better) that produced a 6.5% YTM for the 30-year assignment. We are always willing to provide a free analysis of what CFM can do for your fund.

View this month’s complete Pension Funding Index.

10.07.26
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More Evidence?

By: Russ Kamp, CEO, Ryan ALM, Inc.

As a follow-up to the September 30th post below, here is a note that I found from Bloomberg this morning.

“AI’s enormous funding needs keep growing. SpaceX is said to be in talks to raise $40 billion to buy Nvidia chips in what would be one of the biggest debt financings yet for the technology’s buildout, just days after Broadcom beganlining up $60 billion in AI chip financing for Anthropic and others. Ray Dalio warned AI is a “classic bubble” nearing the point of bursting as rates rise and investors seek cash.”

I’ve been saying for a while that rising rates would put significant pressure on equities in general and the hyperscalers more specifically. It is only becoming more magnified. If you are managing a pension plan, I encourage you to take risk off the table and secure those improved funded ratios.

Is AI Investment Reaching A Natural Limit?
10.06.26
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And There You Go: 6.5% YTM on a 30-year CFM assignment – Incredible!

By: Russ Kamp, CEO, Ryan ALM, Inc.

For those of you responsible for the management of public DB pension systems, the news that we can build a 30-year cash flow matching (CFM) portfolio with a YTM of 6.5% through an investment-grade corporate bond portfolio while restricting quality to BBB+ or better should be incredibly exciting and enticing!

According to NASRA’s April 2026 survey of 132 major public pension plans, the long-term assumed rate of investment return is:

  • Average assumed return: 6.91%
  • Median assumed return: 7.00%
  • This has fallen substantially from an average of 7.94% in 2009.

As a result of today’s rapidly rising rate environment, our CFM optimization process can capture 94.1% of the annual target return, with little uncertainty. This YTM was achieved for a Florida-based public pension plan that was interested to see how CFM could work for them. Here’s what we can do:

  • Secure all the net benefits and expenses (B&E) through 9/30/56
  • The future value of those net B&E is $80.1 million
  • It takes only $31.7 million in assets to secure those FV B&E for a cost reduction on day-one of -60.4%
  • The YTM is 6.5%
  • The average quality is A-, with no exposure to BBB or BBB- bonds

Since we are building the portfolio net of forecasted contributions, those contributions are now known for the next 30-years. What a gift to the sponsor funding this program who no longer needs to be concerned about what annual surprises await. I have no idea where rates will go from here. They are currently not high, as I entered this industry when the 10-year Treasury note’s yield was >15%, and certainly not as low as we witnessed just 6-years ago, when that same note’s yield hit 0.52%. All I know is that the current environment is providing plan sponsors with the opportunity to secure the promised benefits at significant cost reduction with certainty (barring any defaults).

Why would you want to continue riding the performance rollercoaster when you can jump off knowing that you’ve won the funding game? CFM truly is a sleep-well-at-night strategy for both the sponsor and participant. We provide the pillow!