Bank of England announces further measures to protect pension funds from market turmoil – business live

By Anonymous -

UK central bank doubles daily limit on its bond-buying programme, and launches a new facility to ease pension funds’ liquidity pressures

The Bank launched its support for the pensions industry almost two weeks ago, as pensionsfunds invested in liability driven investment (LDI) were dragged close to a ‘doom loop’.

My colleague Richard Partington explains.

The funds had invested in complex derivatives, using long-dated government bonds as collateral – assets pledged as security to back up a financial contract.

In the market turmoil after the mini-budget, the value of UK government bonds fell sharply as investors began to lose faith in the credibility of the Truss administration to run a sustainable tax and spending policy. This meant a rise in yields – which move inversely to bond prices – in a reflection of the increased cost of government borrowing.

“…address risks to their resilience from volatility in the long-dated gilt market. LDI funds have made substantial progress in doing so over the past week.

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 ALL Credit of this post going to https://www.theguardian.com

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