UK government committee 'calls for evidence' in LDI crisis

Work and Pensions Committee

The Work and Pensions Committee has put out a ‘call for evidence’ into the events surrounding and liability-driven investment (LDI) strategies and the Bank of England’s recent emergency intervention.

In a notice released today (24 October), the committee recalled the events of the past few weeks that had triggered a liquidity issue among pension funds. Defined Benefit pension funds typically hold a high level of government bonds, with LDIs often used to hedge off the risk associated with gilt yield movements. In the market turmoil after the Mini Budget, the yield on government debt exceeded 4%, which meant many funds risked being unable to meet immediate liquidity demands, to the point that the Bank of England was forced to intervene. On 28 September, the central bank began a t...