MADRID, 17 Oct. (EUROPA PRESS) –
The Bank of England has assured that its intervention in support of the passive investment pension fund market (‘liability driven investment’ or LDI), which it maintained since last September 28 and terminated last Friday, has allowed “a significant increase in the resilience of the sector”.
The institution has highlighted that the objective of the operations carried out, through auctions for the acquisition of public bonds (Gilts), was to give the LDI funds time to address the risks of their resilience in the face of the volatility of the gilt market, not to provide permanent backup.
Despite the closure of operations last Friday, the Bank of England has confirmed that the temporary extended collateral repo facility (TECRF), announced on October 10, will remain available until November 10, 2022.
Likewise, he explained that the entities also have access to the liquidity of the existing indexed long-term repo facility, which is carried out weekly with a maturity of six months; the discount window facility (DWF); and a weekly US dollar repo backed by international swap lines.
The Bank of England has recalled that it also makes reserves available through its short-term repo facility each week, in order to ensure that short-term market rates remain close to the bank rate.
Despite the fact that the British central bank had begun a process of reducing its balance sheet after several years of asset purchases, the instability in the markets after the announcement of the Liz Truss government’s ‘mini budget’ forced the entity to intervene on on September 28 to restore orderly market conditions and avoid contagion to credit conditions for households and businesses.
