UK Gilt Crisis 2022: How £70 Billion Almost Broke Britain

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The Safest Asset in Britain Nearly Broke Britain

The 2022 gilt crisis was never a solvency crisis — pension funding ratios actually improved, because rising rates cut the present value of future obligations faster than assets fell. It was a pure liquidity crisis in the leveraged derivatives sitting in front of the pensions. Leverage applied to a 'safe' asset is the most dangerous trade in finance, precisely because the safety label hides the one risk that matters: duration. And duration does not require leverage to hurt you. If a bond ETF you own has a modified duration of 15, a one-point rise in rates costs you roughly 15%.

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