<div id="readability-page-1">  <p><time datetime="2026-04-02T13:58:49+01:00">    Thursday 02 April 2026 1:58 pm  </time>      <span> | </span><span> Updated: </span>   <time datetime="2026-04-02T13:59:01+01:00">    Thursday 02 April 2026 1:59 pm  </time></p>         <div>                                                                                                                 Add as a preferred        source on Google                        </div>    <figure>    <div>       </div> <img width="742" height="495" src="https://imageproxy.pbkrs.com/https://www.cityam.com/wp-content/uploads/2026/04/Bank-of-England-on-Threadneedle-Street.jpg/query-dz03NDI?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://www.cityam.com/wp-content/uploads/2026/04/Bank-of-England-on-Threadneedle-Street.jpg/query-dz03NDI"/>  <figcaption>The Bank of England has warned that businesses expect inflation to shoot up.</figcaption> </figure> <p>Bank of England plans to reduce the bond market’s vulnerability to a Liz Truss-style crash would fail to improve financial stability and could make stress points worse, according to gilt traders and hedge funds polled by the Bank.</p><p>Responses to the central bank’s plans to overhaul its regulation of the gilt repo market showed market participants to be generally supportive of officials’ push to improve the bond market’s resilience, but warned two central pillars of the plan would be unfeasible and “concentrate risks”.</p><p>The Bank of England has been examining ways to reduce the fragility of the bond market during periods of market stress in a bid to avoid a repeat of the 2022 gilt crisis. In 2022, the central bank was forced to step into the bond market and buy up government debt, after Liz Truss’s mini-Budget sparked a rout in government bonds that was then compounded by forced selling from highly leveraged pension and hedge funds.</p><p>The Bank’s efforts have focused on the so-called repurchase agreements market – or repo market – where investors use gilts as collateral to borrow cash and make highly leveraged trades.  As well as overseeing the supply of money, Threadneedle Street is also responsible for maintaining financial stability. It has previously sounded the alarm on the repo market, labelling it as one of the main threats to the functioning of Britain’s financial system.</p><figure><img height="640" width="960" src="https://imageproxy.pbkrs.com/https://www.cityam.com/wp-content/uploads/2026/03/andrew-bailey.jpg/query-dz05NjA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://www.cityam.com/wp-content/uploads/2026/03/andrew-bailey.jpg/query-dz05NjA"/><figcaption>Bank of England governor Andrew Bailey has previously warned about leveraged trading of government bonds</figcaption></figure><h2 id="h-bank-plans-could-concentrate-risks-of-bond-rout">Bank plans could ‘concentrate risks’ of bond rout</h2><p>The central bank published its initial reforms to help minimise its risks in September, but a report publishing feedback from fund managers and traders on Wednesday revealed a swathe of reservations to the plans.</p><p>“While respondents broadly recognised the benefits of the reforms proposed… they also raised concerns of the proportionality and potential negative spillovers of market-wide measures,” Bank off England officials said.</p><p>Traders’ unease centred on proposals to oversee the leveraged trades centrally through clearinghouses operated by a third party. Respondents said a move towards more central clearinghouses would reduce the market stress, but  warned the framework proposed by the Bank would be too expensive and fail to work as intended. As well as the added burden it would place on traders, greater clearing oversight could “generate liquidity pressures in stress” and “concentrate risks in the system”, they warned. </p><p>Bond traders also expressed concerns over Bank of England plans to limit their ability to build up large amounts of leverage cheaply. They warned the move – which seeks to put a cap on the ‘haircut’ between the market value of the bond and the amount a bank would allow the bond to be used as collateral – would hike their costs and reduce demand for UK bonds.</p><p>“Most respondents were not supportive or of the potential introduction of minimum haircuts in the non-centrally cleared segment of the gilt market,” officials wrote.</p><h2 id="h-bank-of-england-worried-about-leveraged-bond-bets">Bank of England worried about leveraged bond bets</h2><p>Bank of England officials have repeatedly sounded the alarm on the increasing proportion of UK government bonds that are owned by risk-seeking hedge funds, which take highly leveraged bets on.</p><p>As part of an earlier shake-up to the UK’s superannuation system, pension funds and insurers have been allowed to sell down their holdings in government debt. Whereas institutional investors tended to hold sovereign debt for longer horizons, hedge funds on average trade much more frequently, raising the likelihood that government borrowing costs will be subject to wild, sudden swings.</p><p>In its biannual Financial Stability Report, the central bank said that little-known international hedge funds were snapping up government debt at a record level, exposing the government’s debt to a market meltdown.</p><p>It warned that the amount of debt taken out using gilts as collateral had reached its highest level since it started monitoring the trend nine years ago, with hedge funds using their bonds to borrowing some £100bn of extra cash in November 2025. </p><p>The development has stoked concerns that an economic crisis, or a sudden fall in the price of bonds, could lead to a full-blown gilt crisis, as the traders would be forced to sell their bonds back to banks to cover their positions.</p> </div>

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<p>英格兰银行计划改革国债回购市场以增强金融稳定性，这引发了交易员和对冲基金的担忧。尽管普遍支持改善市场韧性，但提案的关键方面被视为不可行且可能存在风险。交易员担心中央清算所可能增加成本和流动性压力，而对杠杆的限制可能会减少对英国债券的需求。中央银行对对冲基金在债券市场日益增长的影响感到 alarmed，这可能在经济下行期间导致不稳定</p>

Bond traders: Bank of England gilt shake-up would ‘concentrate risks’ in market meltdown

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债券交易员表示，英格兰银行的国债调整可能会在市场崩溃时 ‘集中风险’