Bank of England asks City firms to stress test impact of bond market shock

Institutions asked to model impact of sharp price movement in wake of Liz Truss market chaos

The Bank of England has asked more than 50 City institutions to model the impact of a sharp movement in bond prices caused by a severe geopolitical shock as part of its first financial system-wide stress test.

The request comes after the September 2022 crisis in bond markets and sterling that followed Liz Truss's mini-budget, when pension funds came under pressure and some were driven to near-collapse. A sharp shift in bond prices and the corresponding interest rates, or yields, laid bare major risks that certain kinds of liability-driven investing (LDI) posed to retirement savings.