The head of the city’s watchdog acknowledged that he was not prepared for the risk that a sharp rise in British bond yields after Kwasi Kwarteng’s mini-budget poses to pension funds.
Nikhil Rati, chief executive of the Financial Conduct Authority, told a House of Lords select committee that the threat was not “at the very top of the radar”.
Colleagues are examining how the sell-off in the bond market after Kwarteng’s disastrous financial report triggered a crisis in pension funds, leading to a £65bn intervention by the Bank of England.
Commitment-driven investment strategies came into the spotlight in September following the disastrous mini-budget of then Chancellor Kwasi Kwarteng.
Falling bond prices have forced the liability-managed investment (LDI) funds used by some pension schemes to scramble for cash.
Rati explained that UK bond yields, which are moving in the opposite direction to prices, soared 2.5 percentage points in just five days, “which has never happened in any significant period in our history as this particular risk has not been tested.” “.
Credit: www.thisismoney.co.uk /