Bank of England: Foreign Investor Shift Could Increase UK Gilt Volatility
Foreign Investors and UK Gilt Market Volatility
Changing Investor Demographics
LONDON, May 13 (Reuters) - The growing role of price-sensitive international investors in buying British government debt in place of domestic pension funds risks leading to greater volatility in borrowing costs, Bank of England policymaker Catherine Mann said on Wednesday.
Recent Bond Yield Movements
On Tuesday, amid intense pressure on Prime Minister Keir Starmer, British 30-year bond yields hit their highest since 1998 and 10-year borrowing costs rose to their highest since 2008.
Policymaker Commentary
"Although price-elastic investors can be an advantage in terms of the level of interest rates, they are also more responsive to changes in interest rates on account of domestic or global shocks," Mann said in the text of a speech to be given at the London School of Economics.
Potential Risks and Market Reactions
"Hypothetically, if a new shock were to occur and weigh on investor confidence, these more price-elastic international investors could respond by reducing their gilt holdings. The resulting volatility in yields could be reflected in a persistent risk premium on gilts," she added.
Reporting Credits
(Reporting by David Milliken, editing by Andy Bruce)
