97% Of Spanish Social Security Pension Fund In Domestic Bonds

Tyler Durden's picture

In January, we discussed the stunning fact that Spain's social security pension fund was 90% allocated to Spanish sovereign debt. The latest data shows that this farcical epic reach-around has become even more ridiculous as, according to Bloomberg BusinessWeek, the fund's holdings are now 97% weighted to sovereign bonds. The fund purchased about EUR20bn of Spanish debt last year, while it sold EUR4.6bn of French, Dutch and German bonds. More than 70 percent of the purchases took place in the second half of the year, after Draghi's 'promise' to "do whatever it takes" moment.

It appears, since the Spanish government does not explicitly have its own Fed to monetize debt, that it has merely plundered another quasi-governmental entity to do the bond-buying reach-around. The fund, which was profitable last year on this bond-buying in its self-sustaining way, still contributes 1% to Spain's deficit as contributions to the fund are outweighed by the benefits paid.

Rules have been changed to enable this drastic concentration but at 97%, it is perhaps no wonder that Spanish bonds have been more volatile in recent weeks - as the implicit government buyer is now almost all-in. The potential for a vicious circle here is immense - but perhaps that is the point, more TBTF sovereigns for Draghi to deal with.

Via Bloomberg BusinessWeek,

Spain’s pension reserve-fund ramped up its holdings of domestic debt last year, profiting from a rally across southern Europe and making it easier for Prime Minister Mariano Rajoy to raid the fund to finance his budget.


The so-called Fondo de Reserva de la Seguridad Social in 2012 increased its domestic sovereign debt holdings to 97 percent of its assets from 90 percent at the end of 2011, according to its annual report due to be presented to lawmakers today at 12:30 p.m. in Madrid and obtained by Bloomberg News.


The fund purchased about 20 billion euros ($26 billion) of Spanish debt last year, while it sold 4.6 billion euros of French, Dutch and German bonds. More than 70 percent of the purchases took place in the second half of the year, after European Central Bank President Mario Draghi pledged to do “whatever it takes” to defend the euro, boosting Spanish bonds.




The bond-buying strategy enabled the fund to end 2012 with 63 billion euros, an amount equivalent to 6 percent of Spain’s gross domestic product. A 3 billion-euro gain offset part of the 7 billion euros used by Spain’s Cabinet starting from September to finance an increase in retirees’ pensions and Christmas bonuses, according to the report.


Spain’s state-run social security system, also in charge of unemployment benefits, stopped registering surpluses in 2011. Its deficit was 1 percent of GDP last year, contributing to the nation’s total budget gap of 10.2 percent of GDP.




The maximum amount that can be invested in a given security was increased to 35 percent of the total portfolio from 16 percent. At the same time, the fund raised to 12 percent from 11 percent its maximum share in the Treasury’s total outstanding debt. The Treasury’s debt stock was 634 billion euros in February, according to data on its website.



Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
JPM Hater001's picture

Wait, Isn't America's SS 100% held locally? 


That would mean ours is a Ponzi Scheme too.


Uh oh.

MillionDollarBonus_'s picture

So?? Spanish bonds are paying some sweet yields. The capital gains are irrelevant to funds who intend to hold these bonds to maturity.

hedgeless_horseman's picture



...capital gains are irrelevant to funds who intend to hold these bonds to maturity.


Default?  Not so irrelevant.

BaBaBouy's picture

BITCOIN Would Have Been A Better Gamble For These CHUMPS ...

Irelevant's picture

Bitcoin is a illusion, totally dependent on a functioning and unregulated Internet. To this respect the dollar, backed by the US military is "the best" illusion of them all.

Gold, silver, fresh water, frozen meet, bullets and canned food on the other hand are not illusions, they are real, tangible.

idea_hamster's picture

It's exactly like Enron -- which held 100% of its employees' 401k "savings" in ... Enron stock.  No choices.  No exit.  Just sit back and get poor.

Umh's picture

Not really true; it's just that many Enron employees  were heavily invested in Enron. They did not have to be 100% invested in their employer.

idea_hamster's picture

Interesting -- thanks for noting that.

I've always accepted what I realize was the anecdotal story that Enron's 401k program had only the one investment option.

Should have cite checked my shit before posting....

resurger's picture

Spot on!

 ill "restructure" at maturity for another 10 years, when Interest rate then is 1% , and if the STHTF i will also "restructure" at 20% no problem. just keep the money coming.

I just love a No Plan B Ponzi


AGuy's picture

"Isn't America's SS 100% held locally?"

Worse, They are not even in bonds, just a bunch of paper IOUs


NoDebt's picture

The difference being?

It's all just left pocket/right pocket in the same pair of pants.  It's the government, it's a government program and it's government money.


resurger's picture

I dont even know why traders still say "who's paper is it" ... Now it's just some fucking digital numbers and a formula that calculates basic interest rate S/A etc.

Back in the days, if one holds an IOU paper and the debtor does not pay the fuck up, he would put a a fucking barrel to his mouth and blow his brains out.

No angel, no demon, no divine intervention, no QE, no Twist, no OMT, no Fed, nothing can save you.

And if the creditor was a fucking a kyke, make sure you execute him and shove his IOU up his ass.

Fuck this illusionary world they have created. 

Oldballplayer's picture

It's not a Ponzi scheme because those are illegal.

You have to love that logic.

ShrNfr's picture

Nah, most of it has been spent already. The rest is in untradable government bombs.

Banksters's picture

The historical avg for the us 10 year is 7.1 percent.   Spain, at 26 percent unemployment thinks theirs should be at 5 percent or lower.  Hahaah   Why let the market dictate yield when you can manipulate lower.  Problem is, one day your schemes: esm, efsf, ltro 1, 2, qe 4eva, lending facilities, bond swaps, etc blow the fuck up.






Chuck Walla's picture



 If only they can figure a way to get their hands on all that lotto cash Franco gave away.



Buck Johnson's picture

Big time, what until this whole thing implodes it will take them all down.

Banksters's picture

The state is a tool of banksters.  Those fuckers want it all.

Boston's picture

Not if it's safely stored on the bottom of a small lake..........

ekm's picture

There you have the GREATER FOOL.

Nobody foolishly greater than the spanish ss fund.

TeamDepends's picture

What are they thinking?  The DOW is where the action is.

Super Broccoli's picture

97% of your pension money has been invested in the debt we had to create to pay your grandad's pension ...

OliverTwist's picture

I think I have a solution for this problem.

Young unemployed should form death squads and kill their grandparents.

A non standard measure I know but it could work.

And no, it's not a template!!!


TeamDepends's picture

Grandparents?  They may or may not be guilty.  We need to channel their rage in the proper direction.  Dimon and Kissinger spring to mind.  Add your fav's to the list!

Edward Fiatski's picture

On the backs of the young, with 25% yoof undemployment. Seems sustainable.



krissstofer's picture

Edward, general unemployment is approx 25%, while youth is in fact now around 50%... uh oh

Racer's picture

Have they never heard the saying about all eggs in one basket? Obviously not ...the morons

pods's picture

Not all the eggs.

Some are no doubt deposited in Bank of Cyprus.


ncdirtdigger's picture

Shirley they hold some Greek bonds. Think of the yeild they can collect!

NorthPole's picture

They still have 3 eggs in the Portuguese basket.

LawsofPhysics's picture

Ha - ha!  The situation in the U.S. can't be that different.  When playing poker, if you can't readily identify the sucker at the table, it's probably you.

Silver Garbage Man's picture

And I'm crazy for buying the PHYZZ!

Hondo's picture

Is that better than US with nothing more than IOU's in a file cabinet

NoDebt's picture

That's sort of the problem everywhere.  "If I'm goin' down, I'm takin' you all with me!!"

The only GOOD part of this slow-motion train wreck is the absolute assurance that ALL the players have the same problems, differing only in degree, not in structure.

UK debt marsh's picture

Their jobs are gone.

Their houses are debt millstones.

Now somebody has spent their pension pots on a handful of magic beans.

What is the Spanish for ROTFLMFAO?


Dollar Bill Hiccup's picture

Buy local. All you Euro naysayers, BIS off !

Desperation is in the air.

Draghi : (ZH) VASTLY UNDERESTIMATES committment to Euro ... blah blah blah ... blah blah blah.

Buy Euro, short yen, buy SPY ... hmmm, this all looks familiar ...

Dollar Bill Hiccup's picture


Rather a bottle in front of me than a frontal ...

colin's picture

the other  3 then must be in physical Gold?

Super Broccoli's picture

nah those 3% have been invested in some investment fund that only holds spansih bonds ;-)