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UK Pension Market Stress in 2022 - Why It Happened and Implications for the U.S

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Abstract

A steep increase in British sovereign yields and swap rates and an equally steep drop in the value of the British pound (GBP) in September 2022 put substantial liquidity pressures on United Kingdom pension funds. This repricing in risk assets was triggered by the UK chancellor’s mini-budget announcement on September 23, 2022, which led to reactions from market participants. The structure and investment strategies of pension funds made them particularly ill-prepared to deal with market turmoil.

Suggested Citation

  • Santiago I. Sordo Palacios & Ketan B. Patel, 2023. "UK Pension Market Stress in 2022 - Why It Happened and Implications for the U.S," Chicago Fed Letter, Federal Reserve Bank of Chicago, vol. 0, June.
    • Handle: RePEc:fip:fedhle:96494
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    File URL: https://www.chicagofed.org/-/media/publications/chicago-fed-letter/2023/cfl480.pdf?sc_lang=en
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    Keywords

    financial economics;

    JEL classification:

    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • G01 - Financial Economics - - General - - - Financial Crises
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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