UK Gov't Warns of Hedge Fund Risks in Gilt Market
Update: 2025-12-02
Description
The British government is heavily reliant on foreign hedge funds to finance its financial deficit, primarily through purchasing UK government bonds. However, a growing concern is that these funds are heavily borrowing against these same bonds, creating a risky situation. In November, hedge funds borrowed a record-breaking £100 billion against gilts, raising fears of a potential doom loop and financial instability. The Bank of England is now considering implementing measures, such as limiting hedge funds bets on the UK debt market and imposing minimum margin requirements, to mitigate these risks and protect against future instability.
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