Action Needed on Hedge Funds’ Gilt Leverage, BOE’s Ramsden Says

The UK needs to take action on how much leverage has been accumulated by hedge funds in the gilt market, said Bank of England deputy governor Dave Ramsden, sending a clear signal that officials want to enforce greater oversight.

The BOE’s concerns center on gilt repurchase agreements, or repos, which can be used by investors to borrow sterling against bonds. Such repos allows hedge funds to use leveraged trading strategies, which officials are concerned pose risks to financial stability if traders unwind their positions simultaneously.

“Hedge funds play a critical role in the gilt repo market, an ...