IT STARTED: The UK Economy Is Collapsing!
The economic problems in the UK begins with what’s known as a “Defined Benefit Plan,” where employees are promised a proportion of their salary throughout retirement. These pension funds needs to be properly funded, so that they have the cash to to pay the retired people living in the UK - and they do this by buying bonds.
In a normal market, a fund could very easily borrow money - buy bonds - and then pay the loan back while making extra profit. But in today's market, where bond values are declinin, those same funds would borrow money, collect less from the bond than they were expecting, and not being able to repay their debt.
Typically, Funds like this have cash on hand to cover any type of unexpected emergencies, but when funds were losing money at such a fast pace - they run out of cash reserves and can't come up with enough collateral, which forced them to sell anything they could to meet their debt obligations.
This led to a “Bank Run” where - pensions began selling UK Bonds to reduce their exposure to falling prices…which then…caused prices to fall…causing more pensions to sell…causing prices to fall further…and, pretty soon…they completely run out of liquidity.
As a result, the Bank of England made the choice to step in and PURCHASE falling bond prices to stabilize the market - essentially acting as a backstop to prevent prices to falling any further.