Market history · Bonds ·
The UK mini-budget and the gilt crisis
On 23 September 2022 the UK government announced large unfunded tax cuts. Gilt yields jumped, sterling fell, and pension funds using leveraged liability-driven investment (LDI) strategies faced margin calls, forcing them to sell gilts into a falling market.
On 28 September the Bank of England announced temporary purchases of long-dated gilts, of up to £65 billion, to restore order. The government reversed most of the measures within weeks.
The takeaway
Leverage in a "safe" asset class is still leverage.
This is a retrospective about a past event, provided for general information. It is not investment advice, does not describe RockLake's positioning at the time, and past performance is not a guide to future performance. Read the risk warning.