Tyrie writes to Carney on gilt market liquidity concerns

Fears of unwinding of QE

Treasury Committee chairman Andrew Tyrie has written to FPC chief Mark Carney for a more detailed assessment of current bond liquidity issues, which he warns could leave the UK economy "vulnerable to a vicious circle of declining liquidity and financial distress".

The letter follows a recent report into the issue by the Financial Policy Committee (FPC), which monitors systemic risks in the financial system, after a six month investigation. Tyrie said he has particular concerns about gilts, especially as a substantial proportion of the market is "now held by investors who do not trade actively as liquidity providers, or who are constrained to hold gilts, so that their trading activity is confined to switching between gilts". He highlighted this includes the Bank of England, which held £391bn at the end of June 2015 (or 24% of total gilts outsta...