Tighter regulations are making it increasingly difficult to sell U.K. government bonds. That’s the message from gilt market makers and investors.
Bloomberg News reports that the environment is becoming more challenging as new rules increase costs and make banks less willing to risk their own capital, according to the minutes of a meeting between market makers, investors and officials of the Debt Management Office and Treasury.
Investors at the Tuesday gathering said the burden of regulation risks cutting liquidity and pushing up transaction costs - particularly in the market for repurchases, or repos. They also raised concerns about the level of investor participation at auctions, the minutes published Wednesday show.
“There is no question that liquidity is lower in gilts,” said Richard Kelly, head of global strategy at Toronto-Dominion Bank in London, a gilt primary dealer. “The same can be said about other fixed-income products for that matter.”
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