BoE’s Cunliffe: LDI episode is mostly behind us

The Bank of England (BoE) Deputy Governor Jon Cunliffe said on Wednesday that recent market tensions regarding LDI are “mostly behind us”. He mentioned financial markets have to adjust to government fiscal policies and the market panic was caused by politicians.

Regarding LDIs (Liability Driven Investment), Cunliffe said they have got to the point where on average they could absorb an increase of 200 basis points in yields. He said they do not run stress tests on LDIs.

According to the BoE policymaker, there needs to be more coordination between security regulators and central banks.

Market reaction

The pound remains steady on Wednesday after volatile days. GBP/USD is hovering around 1.1255, down near 70 pips amid a stronger US dollar across the board.