Bank of England Governor Andrew Bailey’s blunt warning that fund managers have to cut vulnerable positions before the central bank ends debt purchases pummeled UK gilts and sent a shiver around already-fragile global bond markets.
UK government bond yields rose, with the rate on 20-year gilts reaching the highest level since the Lehman crisis in 2008, as the strict deadline forced investors to brace for another wave of selling from British pension funds managing £1.8 trillion ($2.86 trillion) in defined-benefit schemes. These funds, which hold assets ranging from US Treasuries to European corporate bonds, are expected to exit positions that were only tenable because the BOE stepped in last month to support the UK gilt market.
