Bank of England plans to curb hedge fund leverage in gilt market

Bank of England continuing with proposals to cap hedge fund leveraging in UK gilt markets

The plans come following recent market shifts and turbulence, such as the Middle East conflict, and aim to curb risk posed by a small number of firms holding concentrated positions and triggering destabilising cross-market unwinds.

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The Bank of England has warned that highly leveraged hedge fund strategies could amplify stress in UK government bond markets during periods of volatility. Policymakers continue to monitor leverage and liquidity risks within non-bank financial institutions.... Article link

Bank of England plans to curb hedge fund leverage in gilt market

The Bank of England is moving forward with proposals to limit leverage used by hedge funds in the UK gilt market, despite industry concerns that the measures could increase funding costs and reduce market liquidity, according to a report by the FT. The central bank plans to introduce minimum “haircuts” on gilt repo transactions, requiring hedge funds to post more collateral when borrowing against government bonds. The proposal forms part of a br…