UK pension schemes are racing to raise hundreds of billions of pounds to shore up derivatives positions before the Bank of England calls time on support aimed at keeping them afloat.
BoE Governor Andrew Bailey said on Tuesday that the bank planned to stop buying bonds on Oct. 14, leaving pension schemes scrambling after a surge in yields to meet a collective cash call estimated to be at least 320 billion pounds without a buyer of last resort.
The cash buffers now required are about three times larger than previously requested, according to four consultants advising pension schemes, as market players seek bigger cushions against greater swings in bond prices. Bailey, speaking in Washington later on Tuesday, said: "And my message to the funds involved and all the firms involved managing those funds. You've got three days left now. You've got to get this done."
Those collateral buffer demands increased to 300 basis points last week, consultants and pension industry experts said. Some schemes have even been asked for 500 basis points this week amid more jumps in bond yields, although that amount remains rare.
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