The central bank forced-yield crush continues to wreck havoc in the real world. When will we the people, and real economy, get our central banks and their finance cohorts to heel? The wreckage from this epidemic of policy hubris is inflicting lasting harm on pensions and savers everywhere. Governments do not have enough tax dollars to bail out a world of exploding deficits. See Fears for pensions as gilt yields turn negative
British government bond yields traded in negative territory on Wednesday, compounding fears that a global collapse in government borrowing costs has tipped the UK’s pension industry into a funding crisis.
Holders of long-dated gilts resist selling, and rally in short-dated paper takes yields negative
The steep fall prompted a former pensions minister to call for a national inquiry into the impact on company pensions of the Bank of England’s new £70bn bond-buying plan, launched to stimulate the economy amid fears of a Brexit-related slowdown.
“The Bank wants to stimulate the economy by bringing down interest rates, but the Bank is not acknowledging the negative impact these measures are having on pension deficits, and neither is the government,” said Ros Altmann, the minister under David Cameron.
Pension funds are some of the largest investors in British government bonds, which they believed would offer a safe and reliable source of income that can be used to pay out future benefits to retirees.
The accelerating collapse of yields has widened already substantial gaps in many large pension funds, which use the rates to estimate how much additional funding they will need to meet benefit payments.