Retail investors’ participation in the gilt market

Sarah Munson and Callum Ashworth

In recent years, retail investors’ demand for UK government bonds (gilts) has increased, marking a change in the composition of market participants. The growth of retail investors, comprised of individuals managing their own portfolios, has been a global phenomenon (Foxall et al (2025)). But what’s driving this change, and what does it mean for the gilt market’s role in monetary policy and financial stability? In this post we explore how UK-based retail participants’ presence in the gilt market is changing and what that might signal for the future. We find that retail holdings of gilts remain modest, with positions concentrated in a handful of bonds. This has limited impact on aggregate liquidity indicators but can impact liquidity in these specific bonds.

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Lifting the lid on a liquidity crisis

Lydia Henning, Simon Jurkatis, Manesh Powar and Gian Valentini

Autumn 2022 saw some of the largest intraday moves in gilt yields in history. It was then that jargon normally confined to financial stability papers entered into mainstream commentary – ‘LDI’, ‘doom loop’, ‘deleveraging’. And it was then that the Bank of England engaged in an unprecedented financial stability motivated government bond market intervention. What happened and why has been set out in detail in official Bank communications. This article instead hovers a magnifying glass over transaction-level regulatory data on derivative, repurchase agreements (repo) and bond markets to quantify liability-driven investment (LDI) and pension fund behaviour and enrich our understanding of these exceptional few weeks of stress.

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How does the gilt curve react to demand shocks?

By Julia Giese and Lucas Fuhrer

The yield curve is an important barometer of market sentiment and reflects interest rate expectations as well as different risk premia. In this post, we show how changes in demand for UK government bonds, also called gilts, may affect the shape of the yield curve. We find that demand shocks have persistent local effects on the yield curve, in particular at longer maturities and during volatile market conditions. These findings therefore indicate that investors in longer-term gilts tend to be less price-sensitive. Moreover, we find that demand shocks for one bond transmit to neighbouring bonds, while the transmission to other bonds declines with the difference in the residual maturity.

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Repo Market Functioning: The Role of Capital Regulation

Antonis Kotidis and Neeltje van Horen

The leverage ratio requires banks to hold capital in proportion to the overall size of their balance sheet. As opposed to the capital ratio, risk-weights are irrelevant to its calculation. The leverage ratio therefore makes it relatively more costly for banks to engage in low margin activities. One such activity – which is crucial to the transmission of monetary policy and financial stability – is repo. This column shows that a tightening of the leverage ratio resulting from a change in reporting requirements incentivised UK dealers to reduce their repo activity, especially affecting small banks and non-bank financial institutions. The UK gilt repo market, however, showed resilience with foreign, non-constrained dealers quickly stepping in.

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