Appetite for a popular, but ultimately disappointing rates bet on the overhaul of the €1.7 trillion ($1.9 trillion) Dutch pension industry is returning, according to BNP Paribas SA.

In what became a crowded trade last year, investors wagered the Dutch revamp would widen the gap between short- and long-dated interest-rate swaps. Their calculation was that as pension funds unwound their hedges and cash flowed out of longer-maturity European government bonds, the long end of the rates curve would move higher relative to the short end.

But it didn’t play out as expected earlier this year, with the shift underway. The heavy positioning meant the moves were smaller than hoped, while the US-Iran war sent energy prices spiraling and drove up shorter rates instead. That narrowed the swaps spread and even pushed long-term rates below shorter ones.

With just over a year of the transition still to go and expectations for rate hikes by the European Central Bank looking overdone, interest is picking up again, according to rates strategist Steven Montgomery.

“I have been asked a lot more questions in the last month than the preceding five months about Dutch pensions,” said Montgomery, who sees the swaps curve as likely to steepen through year-end.

At the end of June, €589 billion of pension fund assets had been converted to the new system, leaving €1.131 trillion of pension assets still to go by the Jan. 1, 2028 deadline, Dutch central bank data show.

Montgomery said there’s a better chance of the so-called steepener trade paying off because far fewer investors are trying to profit from the potential impact of the transition. Its popularity at the longer end of the curve is now about a fifth of what it was at its peak among speculative investors, he said. “The consensus trades are a lot less consensus,” Montgomery said.

The 10s30s curve — the gap between 10- and 30-year swaps — is currently inverted at around minus nine basis points, having steepened for much of last year, hitting a peak of 34 basis points in December.

Interest in the trade also faded due to a rule change that gave pension funds longer to adjust their hedging after transitioning. Meanwhile, some funds also indicated they would retain more hedges than expected, reducing steepening pressure.

And the market backdrop in 2026 wasn’t what traders were expecting, with oil prices and the outlook for ECB monetary policy the dominant driver. The uncertainty about energy-price moves made them nervous about putting the steepener trade back on.

“The ECB story will matter more than the pension fund story,” said Adam Kurpiel, head of rates strategy at Societe Generale SA, forecasting the 10s30s curve will be at minus 20 basis points by year-end. “Peak hawkish ECB pricing still lies ahead.”Montgomery disagrees on the path for interest rates in Europe. In his view, rate-hike expectations are overdone and if central bank policy comes in looser than the market predicts, it could bring shorter rates down, helping the steepener trade.

“Given we have a more dovish view on the ECB than the market, and given we think that the Dutch pension transition is probably slightly underappreciated this year, we would have a steepening bias into and across year end,’ he said.