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Thursday, December 7, 2023

EU watchdog trying to understand UK bond market moves

EU watchdog trying to understand UK bond market moves
© Reuters. A British Pound banknote is seen in front of displayed stock graph in this illustration taken May 7, 2021. REUTERS/Dado Ruvic/Illustration

By Huw Jones

LONDON (Reuters) – The European Union’s securities watchdog has asked Britain about recent extreme moves in UK government bond yields and is monitoring for “spillovers” into the bloc, its chair Verena Ross said on Monday.

UK finance minister Kwasi Kwarteng last month triggered a bond market rout with plans for unfunded tax cuts. Pension funds struggled to meet margin calls on derivatives linked to investment funds listed in EU states Ireland and Luxembourg.

“We are obviously in close touch with the UK authorities to understand the market developments that are currently happening,” Ross, chair of the European Securities and Markets Authority (ESMA), told reporters.

“I think we saw very initially some reaction also in the European markets.”

The UK bond market rout showed how developments can quickly have quite a significant impact and spillover from one market sector to another, Ross said.

“That is something that we address together with national authorities, obviously watching very carefully,” Ross said.

The Bank of England took additional steps on Monday to ease concerns about the expiry of its programme to calm turmoil in the UK government bond market.

Ross was outlining ESMA supervisory priorities for coming years, which will include helping the bloc implement it’s new rules for cryptoassets from 2024, and cracking down on ‘greenwashing’ or companies downplaying their impact on the environment and how climate change will affect their botton line.

Source: Investing.com

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