- Last October, U.Ok. Prime Minister Liz Truss launched a “mini-budget” that triggered a pension fund crisis. The mini-funds episode despatched shock waves across the UK markets and the GBP to 1.11 in opposition to USD.
- In the wake of new inflation numbers yesterday, U.Ok. authorities yields have soared even increased.
- As yields soared throughout the curve—particularly on the lengthy finish (30 years)—pension funds went downward.
- According to Bloomberg, pension funds use leverage to stability belongings with liabilities.
- Pension funds have a big allocation in direction of lengthy-finish bonds which might be extremely levered, so when the worth of the bond drops, they want to submit collateral not to be margin known as.
- As gilt (authorities bond) costs continued to drop, pension suppliers have been pressured to elevate money imminently as the specter of margin name loomed.
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