A different reaction on the bond markets on Monday could have tipped an asset manager over the edge, according to Sky's Ed Conway who has learnt that it was at the centre of discussions involving Bank of England policymakers over the weekend.
Many defined benefit pension schemes had become reliant on these LDI funds, which themselves rely on complex financial engineering, sensitive to any small moves in interest rates.
It intervened by buying up some of the affected bonds, pushing down the interest rates on them. However, that support came to an end on Friday. But the web of regulators monitoring these markets also identified a particular asset manager with a range of funds which remained exposed to rising interest rates. One fund in particular was vulnerable to even a half percentage point rise in long term bond yields.
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