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BoE: The move in gilt yields over the past week threatened to overshoot the size of the cushion for many LDI funds


  • BoE: The movement in gilt yields last week threatened to overshoot the size of the cushion for many LDI funds.

Ryan Pasey

Thursday 06/10/2022 | 09:13 GMT-0

06/10/2022 | 09:13 GMT-0


BoE: The movement in gilt yields last week threatened to overshoot the size of the cushion for many LDI funds.

They keep saying…

If the BoE had not intervened, a large number of LDI mutual funds would have found themselves with a negative net asset value and would have faced shortcomings in the collateral provided to banking counterparties.

This is essentially an exercise by the BoE to make it clear that it single-handedly saved the gilt market – Some may disagree and side with “it was a storm in a cup of tea”

BOE’s Cunliffe: closely monitoring LDI funds to ensure resilience

BoE says it will end intervention in government securities market once risks abate

GBP

GBP

The Pound Sterling (GBP) or Pound Sterling is the official currency of the United Kingdom, Jersey, Guernsey, Isle of Man, Gibraltar, South Georgia and other Pacific territories. The British pound is currently the fourth most traded currency in the world in foreign exchange markets after the US dollar, the euro and the Japanese yen. As the oldest currency in continuous use, the GBP holds significant weight in the global market and is also the fourth largest reserve currency. The Bank of England (BoE) is the authoritative central bank responsible for curating the GBP, issuing its own banknotes, as well as regulating the issuance of banknotes by private banks in Scotland and Northern Ireland. What factors affect the GBP? Like any widely traded currency, several factors affect the GBP. As is often the case, monetary policy has an extremely important impact. Any announcement or policy decision from the BoE is always closely watched given its potential to move the GBP. Additionally, consumer prices (CPI) in the UK as well as inflation levels carry a lot of weight and regularly affect the value of the GBP in the currency markets. Other metrics of note include measures of UK gross domestic product (GDP) or growth, consumer sentiment or confidence. More recently, the drama surrounding Brexit as well as the potential fallout from the negotiations has added another layer of uncertainty to the GBP. At the time of writing, the UK is heading towards a historic schism with Europe, although an agreement has not yet been reached with the two sides unable to reach an agreement. With a smooth resolution nowhere in sight, any development or eventual outcome of Brexit will be hugely important to the GBP’s short- and long-term value.

The Pound Sterling (GBP) or Pound Sterling is the official currency of the United Kingdom, Jersey, Guernsey, Isle of Man, Gibraltar, South Georgia and other Pacific territories. The British pound is currently the fourth most traded currency in the world in foreign exchange markets after the US dollar, the euro and the Japanese yen. As the oldest currency in continuous use, the GBP holds significant weight in the global market and is also the fourth largest reserve currency. The Bank of England (BoE) is the authoritative central bank responsible for curating the GBP, issuing its own banknotes, as well as regulating the issuance of banknotes by private banks in Scotland and Northern Ireland. What factors affect the GBP? Like any widely traded currency, several factors affect the GBP. As is often the case, monetary policy has an extremely important impact. Any announcement or policy decision from the BoE is always closely watched given its potential to move the GBP. Additionally, consumer prices (CPI) in the UK as well as inflation levels carry a lot of weight and regularly affect the value of the GBP in the currency markets. Other metrics of note include measures of UK gross domestic product (GDP) or growth, consumer sentiment or confidence. More recently, the drama surrounding Brexit as well as the potential fallout from the negotiations has added another layer of uncertainty to the GBP. At the time of writing, the UK is heading towards a historic schism with Europe, although an agreement has yet to be reached with the two sides unable to reach a deal. With a smooth resolution nowhere in sight, any development or eventual outcome of Brexit will be hugely important to the GBP’s short- and long-term value.
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