From Breakingviews - BoE remedy can only be partial cure for UK ills
A general view of the Bank of England building, the BoE confirmed to raise interest rates to 1.75%, in London, Britain, August 4, 2022. REUTERS/Maja Smiejkowska/File Photo
The crisis derived from a pension strategy known as liability driven investment , which aims to match funds’ future payments to retirees with similar assets, like long-dated inflation-linked government bonds. Because such securities don’t earn much, funds also use borrowing through repurchase agreements or swaps, freeing up cash to invest in juicier assets like equities. Around 1.5 trillion pounds of assets are held in such strategies in the UK.
The mess left pension funds scrambling to raise margin, and they wound up doing so by selling their most liquid asset – gilts. Yet with the Bank of England withdrawing its bond-buying scheme, there were few buyers for such securities. And the more the pension funds sold, the more gilt prices fell, causing a vicious spiral and fears the funds could run out of cash.
Ireland Latest News, Ireland Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Crypto Lender Nexo Gets U.S. Bank Charter After Buying Stake in Regulated BankNexo’s bank license will bring users enhanced legal safeguards and help it expand its footprint in the U.S., the company said.
Read more »
Australia Issues White Paper for Central Bank Digital Currency – Finance Bitcoin NewsReserve Bank of Australia is researching the potential benefits of launching a central bank digital currency.
Read more »
Bank of America report: Nearly two-thirds of employees worried about financesNearly two-thirds of employees are worried about their finances amid scorching hot inflation, according to a recent report released by Bank of America.
Read more »
Bank of Japan minutes: Market sentiment remains cautious, global slowdown fears have heightenedBank of Japan's July meeting minutes state that members shared the view that market sentiment remains cautious and that global slowdown fears have hei
Read more »
Nexo acquires stake in US chartered bankThe acquisition gives Nexo and its customers the ability to open bank accounts with Summit National Bank. U.S.-based retail and institutional clients also will have access to asset-back loans, card products, and escrow and custodial solutions.
Read more »
World Bank approves $512.2 mln financing for Turkey housing and infrastructureThe World Bank approved $512.2 million in financing for Turkey to expand access to housing and infrastructure that is resilient to climate and natural hazard, the bank said on Wednesday.
Read more »