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I figured I'd start a doomer thread for this Friday.
For those unaware, the 30 year UK gilt yield sky-rocketed in late Sept following an inflationary government budget plan.
The BoE "intervened" as several funds were getting margin calls they weren't able to cover. Worryingly, in a letter from the BoE it seems many funds were not able to sell!
The BoE committed to purchasing £5 billion worth of gilts per day. Although in the same letter they described only purchasing £3.7 billion after 8 days of operations!
Meanwhile, the 30 year yield has resumed its upward trajectory and is now sitting at 4.5% (approx 60bps below its recent high) and the BoE has come out and publicly stated that pension funds have until Friday to sort their balance sheets out.
I thought I'd start this thread to get some ideas about what to expect should the BoE stick to their guns.
If pension funds are forced to dump gilts to settle margin calls, yields are going to soar higher. Besides the implications of higher debt financing costs, I would presume this would lead to additional falls in the GBP as money moves into USD. Or will we be looking at a default event for the UK?
For those unaware, the 30 year UK gilt yield sky-rocketed in late Sept following an inflationary government budget plan.
The BoE "intervened" as several funds were getting margin calls they weren't able to cover. Worryingly, in a letter from the BoE it seems many funds were not able to sell!
The BoE committed to purchasing £5 billion worth of gilts per day. Although in the same letter they described only purchasing £3.7 billion after 8 days of operations!
Meanwhile, the 30 year yield has resumed its upward trajectory and is now sitting at 4.5% (approx 60bps below its recent high) and the BoE has come out and publicly stated that pension funds have until Friday to sort their balance sheets out.
I thought I'd start this thread to get some ideas about what to expect should the BoE stick to their guns.
If pension funds are forced to dump gilts to settle margin calls, yields are going to soar higher. Besides the implications of higher debt financing costs, I would presume this would lead to additional falls in the GBP as money moves into USD. Or will we be looking at a default event for the UK?