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☆ UK gilt yields rise after BoE's Bailey sets pensions deadline
▼ + stars: | 2022-10-12 | by ( ) www.reuters.com time to read: +1 min

LONDON, Oct 12 (Reuters) - British government bond yields rose again on Wednesday after Bank of England Governor Andrew Bailey told pension funds they had three days to sort out their liquidity problems before the central bank ends its emergency bond market intervention. The 20-year gilt yield rose above 5% for the first time Sept. 28, the day the BoE intervened to quell turmoil in the bond market triggered by the government's announcement of big, unfunded tax cuts. It was last at 4.938%, up 2 basis points on the day. Yields rose across the range of maturities with the sharpest increase seen in two-year gilts , up about 10 basis points on the day. Register now for FREE unlimited access to Reuters.com RegisterReporting by Andy Bruce Editing by William SchombergOur Standards: The Thomson Reuters Trust Principles.

☆ The pound rallies from a 2-week low after the Bank of England reportedly signals it's ready to keep buying bonds
▼ + stars: | 2022-10-12 | by ( Karen Friar | ) www.businessinsider.com time to read: +3 min

The pound is rising after a FT report the Bank of England said it may extend its emergency bond buying. The UK currency fell after the BoE chief told pension funds they had three days to sort out their investments. The bond buying aims to calm markets spooked by fears of a UK financial crisis and a hit to pension funds. On Wednesday, the Financial Times reported the Bank of England had signaled privately to several bankers that it could extend its bond buying past the deadline. Analysts said Bailey's giving pension funds just days to sort out their liquidity positions had sent new jitters through the market.

☆ BoE buys record 2.38 billion pounds of gilts at reverse auction
▼ + stars: | 2022-10-12 | by ( ) www.cnbc.com time to read: 1 min

The Bank of England accepted a record amount of gilts at a reverse auction on Wednesday. The Bank of England accepted all 2.3754 billion pounds ($2.63 billion) of long-dated conventional gilts which it was offered at its reverse auction on Wednesday, a record sum as the temporary purchase programme approaches its end. The volume of gilts the BoE bought was the highest at any daily reverse auction since the programme started on Sept. 28, although the total sum offered was well below the 5 billion pounds which the BoE said it was prepared to buy. Earlier on Wednesday the BoE said it bought 1.9798 billion pounds of index-linked gilts.

☆ UK pensions sector must move quickly as BoE deadline looms - regulator
▼ + stars: | 2022-10-12 | by ( ) www.reuters.com time to read: +2 min

LONDON, Oct 12 (Reuters) - UK pension fund trustees should step up engagement with investment managers to quantify funding gaps and risks prior to the end of the Bank of England's (BoE) emergency bond-buying scheme on Oct. 14, The Pensions Regulator said on Wednesday. The regulator has also encouraged schemes to consider appointing professional trustees and to discuss whether employers are able to provide cash to help plug any liquidity shortfall, it said in a guidance statement for pension fund trustees and advisers. The BoE has had to step in to stabilise markets. In a sign of the spillover of the stress to other asset classes, Columbia Threadneedle said late on Tuesday it had suspended a property fund aimed at retail investors. read more($1 = 0.9118 pounds)Register now for FREE unlimited access to Reuters.com RegisterReporting by Sinead Cruise and Carolyn Cohn Editing by Mark PotterOur Standards: The Thomson Reuters Trust Principles.

British financial markets have been under strain since Sept. 23 when finance minister Kwasi Kwarteng announced 45 billion pounds ($50 billion) of tax cuts, without saying how they would be paid for. The Institute of Fiscal Studies think-tank has said the strategy will require 62 billion pounds of spending cuts or tax rises to stop the public debt growing - a daunting proposition after more than a decade of tight government spending. Register now for FREE unlimited access to Reuters.com RegisterTruss and Kwarteng say their tax cuts will boost economic growth and restore the public finances over the medium term. Asked if she was sticking to a pledge not to cut spending made during the Conservative leadership contest, she said: "Absolutely, absolutely." Her spokesman later said that although public spending overall would rise, "there will be deeply difficult decisions to be taken given some of the global challenges we're facing".

☆ Morning Bid: Confusion reigns
▼ + stars: | 2022-10-12 | by ( ) www.reuters.com time to read: +4 min

Then BoE chief Andrew Bailey said late Tuesday: "You've got three days left now. You've got to get this done" - even as the Financial Times reported the central bank might extend the support. The tension built with Britain's economy looking set to go into recession as data showed it unexpectedly shrank in August. "The worst is yet to come, and for many people, 2023 will feel like a recession," said IMF chief economist Pierre-Olivier Gourinchas. * G20 finance ministers and central bankers meet at annual IMF/World Bank meeting in Washington* Bank of England Financial Policy Committee publishes summary of latest meeting.

☆ Bailey outburst blunts BoE crisis-fighting tools
▼ + stars: | 2022-10-12 | by ( Neil Unmack | ) www.reuters.com time to read: +5 min

LONDON, Oct 12 (Reuters Breakingviews) - Andrew Bailey is in danger of blunting the Bank of England’s crisis tools. The UK central bank governor on Tuesday vowed to end emergency bond-buying that has been propping up pension funds, even as investors increasingly assumed the scheme might get extended. Indeed, 30-year bond yields have risen further on Wednesday. Lastly, if Bailey is indeed forced to U-turn by extending the programme, he will have damaged the bank’s credibility. The BoE announced a 65 billion pound government bond purchase scheme on Sept. 28 to help indebted pension funds facing margin calls avoid being forced to sell gilts.

☆ Breakingviews: Bailey outburst blunts BoE crisis-fighting tools
▼ + stars: | 2022-10-12 | by ( Neil Unmack | ) www.reuters.com time to read: +5 min

LONDON, Oct 12 (Reuters Breakingviews) - Andrew Bailey is in danger of blunting the Bank of England’s crisis tools. The UK central bank governor on Tuesday vowed to end emergency bond-buying that has been propping up pension funds, even as investors increasingly assumed the scheme might get extended. Indeed, 30-year bond yields have risen further on Wednesday. CONTEXT NEWSBank of England Governor Andrew Bailey reiterated in a speech on Oct. 11 that the bank planned to its cease its emergency government bond purchases on Oct. 14. The BoE announced a 65 billion pound government bond purchase scheme on Sept. 28 to help indebted pension funds facing margin calls avoid being forced to sell gilts.

Governor of the Bank of England, Andrew Bailey, speaks during the Bank of England's financial stability report news conference, at the Bank of England, London August 4, 2022. And what they can't allow is for the bond market to be overly volatile," said Iain Stealey, CIO of fixed income at JPMorgan Asset Management. U.S. and German 30-year borrowing costs are up just 16 and 33 bps respectively , this month and the contrast highlights the scale of selling gripping Britain's bond market. The unprecedented bond market moves triggered hefty collateral calls on hedging strategies that many funds are still struggling to meet. Bond market volatility has also raised doubts about whether the BoE can press ahead with its plan to sell some of its bond holdings, a process known as quantitative tightening (QT).

☆ Morning Bid: The Next Three Days
▼ + stars: | 2022-10-12 | by ( ) www.reuters.com time to read: +3 min

Well, the Bank of England's Andrew Bailey has crowed, sort of making clear the Liz Truss government can't bank on it defending markets from the fallout of an ill-conceived economic revival plan for more than three days. "You've got three days left now. You've got to get this done," Bailey said on Tuesday, referring to the pension funds. Meanwhile, the U.S. dollar is up, yen is at 24-year lows, yields are soaring, sterling is wobbling and oil is slipping. That comes days after a sweeping set of export controls published by the Biden administration aimed at cutting China off from certain semiconductor chips made anywhere in the world with U.S. equipment.

Register now for FREE unlimited access to Reuters.com Register"We have announced that we will be out by the end of this week. "My message to the funds involved and all the firms involved managing those funds: You've got three days left now. Investors are nervous that Friday's halt to the BoE's bond-buying might come too soon for some pension funds. But a BoE spokesperson said it had been made "absolutely clear in contact with the banks at senior levels" that the Friday deadline would hold. On Wednesday, it said it was "closely monitoring" liability-driven investment (LDI) funds, which are key to pension funds, ahead of Friday's deadline.

☆ The Next Three Days
▼ + stars: | 2022-10-12 | by ( ) www.reuters.com time to read: +3 min

Well, the Bank of England's Andrew Bailey has crowed, sort of making clear the Liz Truss government can't bank on it defending markets from the fallout of an ill-conceived economic revival plan for more than three days. "You've got three days left now. Meanwhile, the U.S. dollar is up, yen is at 24-year lows, yields are soaring, sterling is wobbling and oil is slipping. Not all is lost for the chip industry that has been hammered in the past few days after a Reuters report on Tuesday that the U.S. government has allowed at least two non-Chinese chipmakers operating in China to receive restricted goods and services without their suppliers seeking licenses. That comes days after a sweeping set of export controls published by the Biden administration aimed at cutting China off from certain semiconductor chips made anywhere in the world with U.S. equipment.

REUTERS/Brendan McDermid/File PhotoOct 12 (Reuters) - Signs of stress are growing in the global financial system, sparking worries over everything from contagion between markets to ruptures in financial products. This week alone, a gloomy report from the International Monetary Fund flagged risks of “disorderly asset repricings” and “financial market contagions” while JPMorgan chief Jamie Dimon predicted a looming recession. Global financial conditions, which reflect the availability of funding, touched their tightest since 2009 in late September, an index compiled by Goldman Sachs showed, lifted by surging interest rates, falling equities and a soaring dollar. “There are dollar funding shortages.”The IMF's Global Financial Stability Report, released Tuesday, also highlighted specific risks in open-end investment funds and the leveraged loan market. U.S. Treasury Secretary Janet Yellen on Tuesday said she has not seen signs of financial instability in U.S. financial markets despite high volatility.

And futures now assume the inflation fight will fall solely on the BoE and expect it to triple policy rates to as high as 5.8-6% next year. On Tuesday, the independent Institute for Fiscal Studies said Kwarteng needed 62 billion pounds ($68.22 billion) of spending cuts to keep public debt sustainable over time, with borrowing this year on course for 194 billion pounds and still above 100 billion by 2026/27 - over 70 billion higher than OBR forecasts in March. QE involves the purchase of mostly gilts from commercial banks in return for interest-bearing reserves at the central bank. And, unlike other major central banks, the BoE policy rate itself is the rate paid on those bank reserves. NIESR last year urged a solution to the problem whereby Treasury and central bank reduced the maturity mismatch by swapping longer-dated gilts back to Treasury to cut duration of its portfolios.

☆ Britain warns of tighter rules for crisis-hit LDI funds
▼ + stars: | 2022-10-12 | by ( Huw Jones | ) www.reuters.com time to read: +3 min

The FCA regulates asset managers who sell and run LDI strategies, while TPR regulates pension funds. The BoE oversees banks, some of which are part of the LDI chain. LDI is a popular product sold by asset managers to pension funds, using derivatives to help them match assets with liabilities so there is no risk of a shortfall in money to pay pensioners. Pension funds struggled to come up with higher collateral calls to back the derivatives used in the strategy, forcing the BoE to intervene in the gilts market. Given many LDI funds are listed in Dublin or Luxembourg, the European Union would also need to make reforms to implement such requirements.

That was when the BoE moved to quell bond market turmoil triggered by the plans of the new government of Prime Minister Liz Truss for big, unfunded tax cuts. Register now for FREE unlimited access to Reuters.com Register"We have announced that we will be out by the end of this week. "My message to the funds involved and all the firms involved managing those funds: You've got three days left now. Investors are nervous that Friday's deadline for the end of the BoE's bond-buying might come too soon for some funds. The BoE press office said it had no further comment to make beyond those of Bailey on Tuesday in Washington.

☆ UK pensions: There's no quick fix for the market mess
▼ + stars: | 2022-10-12 | by ( Julia Horowitz | ) edition.cnn.com time to read: +7 min

Almost 20 days after Finance Minister Kwasi Kwarteng unveiled his much-criticized plan to jumpstart the economy, sparking an investor revolt, the UK bond market and the British pound remain under huge stress — despite three emergency interventions by the central bank. The country’s central bank is in a difficult position. It’s trying to restore the UK government’s lost credibility in markets, though its toolkit isn’t designed for this kind of effort. “Investment consultants are working feverishly.”Ongoing volatility in the bond market is further complicating those efforts, as rising yields once again put hedging strategies at risk. Yet as bond yields keep rallying, not everyone is convinced that approach makes sense.

While estimates of how much pension funds need to sell vary they are in the hundreds of billions of pounds, and it is not known how much funds have already raised in cash. Tuesday's BoE intervention was targeted at buying index-linked bonds, a far smaller market than gilts, dominated by pension funds and which suffered another significant selloff this week. He estimates pension funds could sell assets totalling around 300 billion pounds as they adjust hedging positions, although it is not clear how much they may have sold already. He estimated 100 billion pounds could come from gilts and the rest from assets such as global credit, global equities and asset-backed securities. "The bottom line is a lot of schemes need to rebalance their portfolios," he said.

Earlier in the day the British central bank said it would continue to buy bonds this week. The pan-European STOXX 600 index (.STOXX) lost 0.56% and MSCI's gauge of stocks across the globe (.MIWD00000PUS) shed 0.97%. Emerging market stocks (.MSCIEF) lost 2.28% after hitting an April 2020 low and were set for a near-30% tumble year-to-date, their biggest decline since 2008. read moreGILT RESPITEBonds globally have been sideswiped by the rout in UK government bonds, known as gilts, pushing yields on U.S. Treasuries up sharply. Bond market trading was volatile with longer-dated U.S. Treasury yields hitting multi-year highs.

We think the rebalancing must be done," Bailey said at an event organised by the Institute of International Finance. "My message to the funds involved and all the firms involved managing those funds: You've got three days left now. Bailey was keen to distinguish between the temporary, financial stability nature of the latest intervention and previous quantitative easing stimulus. HEAVY LOSSESInflation-linked gilts, typically held by pension funds and known in the market as linkers, suffered a massive sell-off on Monday as the end to the BoE's programme on Friday approached. Simeon Willis, chief investment officer of pension consultants XPS, said he had seen pension funds selling "across the board" to find liquidity.

Investors were also digesting the latest moves by the Bank of England, which continued to support its bond market. read moreIn addition, the International Monetary Fund on Tuesday warned of a disorderly repricing in markets, saying global financial stability risks have increased. "Nothing has happened," to cause the rebound said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. The pan-European STOXX 600 index (.STOXX) lost 0.56% and MSCI's gauge of stocks across the globe (.MIWD00000PUS) shed 0.79%. 1/5 A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 11, 2022.

☆ Factbox: Ticking bomb: The risks the IMF sees to financial stability
▼ + stars: | 2022-10-11 | by ( ) www.reuters.com time to read: +3 min

Oct 11 (Reuters) - The International Monetary Fund warned on Tuesday of a disorderly repricing in markets, saying global financial stability risks have increased, raising the potential of contagion and spillovers of stress between markets. The IMF's Global Financial Stability Report, which warned of the risks to markets, came as the Fund also cut its growth outlook in its latest World Economic Outlook. read moreHere are key indicators of stress and risks the IMF sees to financial stability:Register now for FREE unlimited access to Reuters.com Register* LIQUIDITYDeteriorating market liquidity conditions may poserisks to financial stability, the IMF said. * CURRENCY SWAPSInternational short-term dollar funding markets have begun to show signs of concern with a widening of the cross-currency basis swap spreads, a proxy for the marginal cost of offshore US dollar funding, the IMF said. * LEVERAGE LOAN MARKET CREDIT CRUNCHTighter financial conditions, mounting liquidity strains, and decelerating earnings growth could presage ratings downgrades and eventual defaults and lower returns for collateralized loan obligations (CLO) investors, the IMF said.

☆ BOE Adds Index-Linked Gilts to Bond Purchase Program
▼ + stars: | 2022-10-11 | by ( Paul Hannon | ) www.wsj.com time to read: 1 min

The Bank of England added inflation-linked government bonds to its program of bond purchases after a fresh attempt to extend support to pension funds failed to assuage worried investors. The central bank on Tuesday said it would buy up to £5 billion of index-linked gilts each day through Friday, equivalent to $5.5 billion. On Monday, the bank doubled the total daily amount of bonds it could buy to £10 billion.

☆ World stocks head back towards 2-year lows as mood sours
▼ + stars: | 2022-10-11 | by ( Dhara Ranasinghe | ) www.reuters.com time to read: +4 min

There was a modest respite for Britain's battered bond market after the Bank of England said it would start purchasing inflation-linked debt. And MSCI's world stock index was down 0.5% -- moving back towards roughly two-year lows hit last week (.MIWD00000PUS). Emerging market stocks hit their lowest level since April 2020 and are on track for a near-30% tumble year-to-date, its worst year since the 2008 global financial crisis. GILT RESPITEBritish government bond or gilt yields edged lower, having soared on Monday, following the BoE's latest efforts to shore up the battered bond market. The Aussie dollar fell to a 2-1/2-year low of around $0.6248 and the kiwi dollar hit a low of $0.5536.

☆ Iceland tops global pensions league, Britain slips -survey
▼ + stars: | 2022-10-11 | by ( ) www.reuters.com time to read: +2 min

LONDON, Oct 11 (Reuters) - Iceland offers the best pension provisions, followed by the Netherlands and Denmark while Britain slipped a spot to 10th place in the world ranking, an annual survey showed on Tuesday. Mexico shot eight places up the rankings to 29 due to pension reform, Mercer said. The survey compares 44 retirement income systems globally and covers 65% of the world’s population. "Policymakers must do all they can to ensure retirement schemes are supported, developed and well-regulated." Register now for FREE unlimited access to Reuters.com RegisterReporting by Carolyn Cohn; Editing by Susan FentonOur Standards: The Thomson Reuters Trust Principles.

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