The unprecedented collateral calls pension funds had to meet for their liability-driven investment portfolios in the wake of last month's Mini Budget represented a "full scale liquidation event", the Bank of England has stated.

Speaking at a Treasury Committee meeting questioning the Bank of England on financial stability following the Mini Budget, Andrew Hauser, executive director of markets at the Bank, explained the scale of the crisis that led the central bank to intervene in gilt markets, reports  Investment Week.

"This was a situation that went from ‘we are ringing you to let you know', to shouting on the phone in two days," Hauser said.

"The Friday [23 September] was a conversation of ‘it has been a bit tricky today'… it is probably okay.

"On Monday the tone was getting more worried and by Monday evening I was in back-to-back calls with LDI firms who would be up that night listing the gilt sales they would be executing the following morning."

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Hauser clarified this was well outside the typical remit of these firms, who tend to sell a "few gilts in a rather orderly way".

"This was a full-scale liquidation event," he warned.

Unprecedented

Jon Cunliffe, deputy governor of financial stability at the Bank of England, explained the sheer pace of rising gilt yields, was far beyond anything recently experienced.

"For the long end of the curve, this is outside of historical experience," he said.

"The largest single daily move I think we have had, which was in 2000, was in the mid-30s.

"All the high moves that we have had have either been followed by a reversal in the following days, or in one instance of a 20 basis points move, stayed stable."

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The recent volatility saw the 30-year gilt yield rise by more than 130 basis points in less than a week.

He explained that while the shifts had occurred on the "base of stretched international markets", there was "clearly a UK component" that drove the LDI crisis.

Briefing

Cunliffe clarified the Bank had not received a full briefing of the package of fiscal policies that would be unveiled in the Mini Budget and had therefore not been able to take them into account in its Monetary Policy Committee or warn of potential market reaction.

"Had we thought there was a clear risk to financial stability… we would have advised," he said.

"But not on the composition of fiscal policy. The advice would be about a knock-on effect on financial stability."

He added that while the Bank had not received a briefing for September's fiscal event, he did expect one for the statement due on 31 October, particularly given its accompaniment by an OBR forecast and the chancellor's recent underlining of the importance of a relationship with the central bank.