 Pension funds, bonds and gilt market stabilityJennifer Churchill and Bruno Bonizzi Chapter 14 in Central Banking, Monetary Policy and Financial In/Stability, 2025, pp 272-286 from Edward Elgar Publishing Abstract: In September 2022 UK gilt yields rose by 130 basis points over the course of a couple of days. Fearing broader financial instability, the Bank of England intervened. These events showcased in spectacular fashion an irony of modern market-based finance: pension funds, often assumed to be the most patient of investors, can in fact be destabilising. Aspects of the episode were down to specific features of UK regulation – a failure of leverage restrictions and the dangers of mark-to-market discount rates to value pension fund liabilities. Other more general features allow broader lessons to be learnt: how pension funds invest, and what they invest in, depends to a large extent on the structural features of the financial system in which they are embedded. More than this, the event takes us to a question of central importance in economies where market finance has been growing: should gilt market stability be a greater priority going forward, given both its financial and political significance? And what role might institutional investors and the central bank play in achieving this stability? Keywords: Pensions; UK; Financial stability; Central banks (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:21992_15 Ordering information: This item can be ordered from Access Statistics for this chapter More chapters in Chapters from Edward Elgar Publishing |
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