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This is the bit I didn’t really understand, and still not sure I do. It’s also the bit that Peston suggests took the BoE by surprise and was the bit I meant when I said no-one understood.
t.o.-
This is the bit I didn’t really understand, and still not sure I do
That makes two of us! It sounds like some short term betting of some kind on bond yield rates(?), but all of the financial jargon of margin/option calls goes right over my head.
Peston mentioned Toby Nangle's article talking about it in the summer before it all kicked off, I think this might be it:
https://www.ft.com/content/83927688-e0d1-4934-8d91-e279da6d6b6c (archive link)
slippers
This is the important bit. Pension funds were doing weird derivative shit in schemes set up by major banks (LDIs, or liability-driven investments), rather than simply taking the yield from the bonds they already held (the value of which would have increased…), or doing what the financial industry is really meant to do and invest in the real economy.
That process was not properly policed by the Bank of England's financial policy committee.