Corporate defined benefit plan funded levels increased during the second quarter of 2026. The primary drivers were positive returns in return-seeking asset classes more than offsetting narrowed credit spreads. A typical return-driven plan had an 8.5% increase in its funded ratio, while a typical liability-driven plan observed a 2.5% increase. Return-driven plans with higher equity allocations saw a larger increase in funded status due to the larger impact of positive equity returns on the assets.
Chart 1: Funded Ratio Change: Return-Driven Plan1
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Chart 2: Funded Ratio Change: Liability-Driven Plan1
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Treasury Rates
Treasury rates increased and had a mixed impact on funded status.
During the quarter, the Treasury curve flattened unevenly with rates increasing along the short end and remaining relatively flat at the long end of the yield curve. The short to intermediate portion of the curve increased approximately 10-30 basis points (bps), while the long end of the curve remained relatively flat. In isolation, the relatively flat long‑duration Treasury rates resulted in a minimal impact to liabilities, modestly reducing funded ratios for return‑driven plans due to the uneven curve shift, while liability‑driven plans experienced minimal funded status change due to the close alignment between fixed income assets and liabilities..
Chart 3: Treasury Curve2
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Credit Spreads
Credit spreads narrowed and had a negative impact on funded status.
Tightening credit spreads increased the discount rates and decreased liabilities. Intermediate duration credit spreads narrowed 14 bps while long duration credit spreads narrowed 12 bps. The overall decrease in spreads was driven by improved investor risk appetite, economic growth and increased demand for corporate bonds. On a net basis, considering mixed changes on the Treasury curve, the total corporate bond discount rate for pensions increased approximately 2 bps.
Chart 4: Credit Spreads2
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Equities
Equity market performance had a positive impact on funded status.
Overall positive performance, with near record highs after a volatile first quarter, increased funded statuses this quarter, driven by stronger-than-expected earnings and continued artificial intelligence capital spending. U.S. large-cap stocks underperformed U.S. small-cap stocks with returns of approximately 15.20% and 21.49%, respectively. International equities underperformed domestic equities and returned around 14.49%.
Chart 5: Equity Index Total Returns2
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1Assumptions
- Data as of 6/30/2026, Source: PNC.
- The funded ratio changes are for generic plans with allocation and liability profiles specified below. Results are market driven and do not incorporate any plan-specific effects, such as benefit payments, expenses, benefit accruals or plan contributions. Funded ratio changes are sensitive to the beginning of the period funded ratio.
- A return-driven plan is a pension plan with an asset allocation commonly associated with an absolute return-objective and has a high allocation to return-seeking assets (public equity in this case) and typically has high funded status volatility. Assumed asset allocation is 70% MSCI All Country World, 30% Bloomberg Aggregate.
- A liability-driven plan is one that is well along its path in a liability-centric approach to investing and has a large allocation to long-duration bonds to help reduce funded status volatility. Assumed asset allocation is 20% MSCI All Country World, 64% Bloomberg Long Credit, 16% Bloomberg Long Government.
- Liability profile is based on BAML Mature/Average U.S. Pension Plan AAA-A Corp Indexes with average duration of 12.8 years.
2Data as of 6/30/2026, Source FactSet®. FactSet® is a registered trademark of FactSet Research Systems Inc. and its affiliates.
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Accessible Version of Charts
| Return-Driven Plan | Funded Ratio Change |
| Beginning of Quarter | 100.00% |
| Change due to Treasury Rates | -0.4% |
| Change Due to Credit Spreads | -1.4% |
| Change Due to Equities | +10.2% |
| End of Quarter | 108.4% |
| Liability-Driven Plan | Funded Ratio Change |
| Beginning of Quarter | 100% |
| Change due to Treasury Rates | -0.0% |
| Change Due to Credit Spreads | -0.4% |
| Change Due to Equities | +2.9% |
| End of Quarter | 102.5% |
Maturity | 12/31/25 | 3/31/26 | Change (right axis) |
1 | 3.75% | 4.11% | 0.36 |
3 | 3.87% | 4.20% | 0.33 |
5 | 3.98% | 4.23% | 0.25 |
7 | 4.13% | 4.29% | 0.16 |
9 | 4.31% | 4.42% | 0.11 |
11 | 4.51% | 4.58% | 0.07 |
13 | 4.70% | 4.74% | 0.04 |
15 | 4.85% | 4.90% | 0.05 |
17 | 5.00% | 5.02% | 0.02 |
19 | 5.10% | 5.11% | 0.01 |
21 | 5.15% | 5.16% | 0.01 |
23 | 5.17% | 5.17% | 0.00 |
25 | 5.16% | 5.15% | -0.01 |
27 | 5.12% | 5.11% | -0.01 |
29 | 5.05% | 5.05% | 0.00 |
Date | Intermediate Credit Option-Adjusted (OAS) | Long Credit Option-Adjusted Spread (OAS) |
3/31/26 | 0.73 | 1.06 |
4/30/26 | 0.64 | 0.95 |
5/31/26 | 0.58 | 0.88 |
6/30/26 | 0.59 | 0.94 |
Chart 5: Equity Index Total Returns2
| Index | Date | Percent |
| Russell 3000 | 3/31/26 | 0.00 |
| 4/30/26 | 10.18 | |
| 5/31/26 | 15.73 | |
| 6/30/26 | 15.35 | |
| MSCI ACWI ex USA | 3/31/26 | 0.00 |
| 4/30/26 | 9.65 | |
| 5/31/26 | 15.17 | |
| 6/30/26 | 14.49 |
