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The upheaval in gilt (UK government bond) markets that led to last week’s spectacular intervention from the Bank of England continues to reverberate.

The Bank was obliged to buy long-dated gilts – those with a maturity of 20 or 30 years – on Wednesday last week following a wave of forced selling by pension funds.

Those pension funds had been engaging in strategies known as liability-driven investment (LDI) which, despite becoming a £1.5 trillion market, was until last week little known outside the world of pensions investing.

Under the strategies, pension funds seek ways to better match their assets (the retirement savings of scheme members) with their liabilities (the future pension payments that have been promised to those members on their retirement).

They did so using derivatives contracts – a way of using leverage – but, when gilt yields spiked higher as markets took fright at Kwasi Kwarteng‘s borrowing plans in his mini-budget, the investment banks that write those derivatives contracts sought more money from the pension funds to reflect the fact that gilt prices were falling (the yield and the price move in opposite directions).

The episode has led to a lot of misunderstanding. One is that the Bank has spent £65 billion propping up the gilt market. It hasn’t: it has simply indicated that the maximum it could end up spending under its intervention will be £65 billion.

Another is that this is some kind of taxpayer bail-out of pension funds. Again, it isn’t.

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It is more akin to the Bank’s asset purchase scheme, or Quantitative Easing in the jargon, under which the Bank bought assets like gilts and held them on its balance sheet, although the Bank would prefer this latest move not to be regarded as QE, more a special operation to ensure more orderly market conditions.

Pension funds have not been given something for nothing by taxpayers and nor does the Bank emerge with nothing for the money it spends – it emerges with a holding of gilts on which interest will be payable by the government.

Other misconceptions concerned those who participate in LDI.

Shares of Legal & General, one of the biggest insurance companies in the FTSE-100, have come under pressure since questions began being asked about its participation in the LDI market.

Between the close on 22 September – the night before Mr Kwarteng unveiled his mini-budget – and the close of business last Friday night, shares of Legal & General fell by just under 15%.

That may be because the episode shone a spotlight on L&G’s role in the LDI market in an unflattering way. It was widely reported that the sell-off gathered momentum early last week because L&G had been requesting that pension fund clients put up more cash in response to falling gilt prices.

The investment bank Jefferies had said on Monday that the insurer could be exposed to fund outflows as a result: “The biggest risk for L&G is that this crisis has discredited the firm’s risk management abilities.

“In the process, it’s possible that this sparks outflows from LDI funds, as clients reallocate to alternative strategies, with lower liquidity risks.”

So today’s stock exchange announcement from L&G, in which it clarified its role in LDI and set to soothe the anxieties of investors, is a big deal.

The company made clear that Legal & General Investment (LGIM), its asset management arm, has merely been acting as an agent between LDI clients – pension funds – and market counterparties sitting on the other side of those trades, chiefly investment banks.

It added that, as a consequence, it “therefore has no balance sheet exposure”.

L&G also praised the Bank’s intervention and said that, as a result, interest rates had come down.

It added: “These steps have helped to alleviate the pressure on our clients.”

The insurer added for good measure that, although it holds gilts as part of its investment activities, the sell-off had not affected its capital or liquidity position.

It went on: “Despite volatile markets, the group’s annuity portfolio has not experienced any difficulty in meeting collateral calls and we have not been forced sellers of gilts or bonds.”

Shares of L&G have rallied by more than 5% on the statement while shares of Aviva and Phoenix Group, two other big FTSE-100 life companies, have also bounced.

While L&G’s statement may have calmed nerves about its own role in the LDI market, it may not do so for the market as a whole. People are rightly confused and concerned about how defined benefit pension funds, which, in theory, should be an exceptionally safe and dull corner of the investment universe, have suddenly – thanks to the involvement of derivatives products – been made inherently more risky and prone to the vagaries of market movements.

Lord Wolfson, the chief executive of Next and one of the most influential figures in British business, said last week that he had written to the Bank in 2017, when Mark Carney was governor, outlining his concerns about LDI strategies.

He said the strategy – buying gilts and then using them as collateral to obtain further exposure to the gilt market – “always looked like a time bomb waiting to go off”.

So L&G’s statement today is far from being an end of the matter.

The Commons Treasury Select Committee is now looking into the issue and is set to question the Pensions Regulator. The Financial Conduct Authority and the Bank are also likely to be asked what they knew.

One of the bankers who helped invent LDI strategies told the Financial Times this week that the technique had “helped stabilise pension funding over the past two decades” and that it had helped “provide a future for millions of members of defined-benefit funds”.

But it seems likely that the Bank, which is mandated to maintain the stability of the UK’s financial system, will now be looking to make this particular corner of the markets less risky.

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Trade war: Trump reveals first two nations to pay delayed ‘liberation day’ tariffs

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Trade war: Trump reveals first two nations to pay delayed 'liberation day' tariffs

Donald Trump has warned that all goods from Japan and South Korea will face tariffs of 25% from 1 August.

The announcement, via his Truth Social platform, marks the restart of the threatened “liberation day” escalation that was paused in April, for 90 days, to allow for negotiations to take place with all US trading partners.

The president showed off copies of letters to the leaders of both Japan and South Korea informing them of the tariff rates. Those duties will come on top of sector-specific tariffs – such as 50% rates covering steel – already in force.

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He warned the rates could be adjusted “upward or downward, depending on our relationship with your country”.

Country-specific tariffs had been due to take effect from Wednesday this week but Mr Trump had earlier revealed that nations would start to get letters instead, setting out the US position.

Duties would take effect from 1 August, without any subsequent deal being agreed, it was announced.

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The letters sent to Japan and South Korea cited persistent trade imbalances for the rates and included the sentence: “We invite you to participate in the extraordinary Economy of the United States, the Number One Market in the World, by far.”

He ended both letters by saying, “Thank you for your attention to this matter!”

The European Union – the biggest single US trading partner – is among those set to get a letter in the coming days.

Mr Trump has also threatened an additional 10% tariff on any country aligning itself with the “anti-American policies” of BRICS nations – those are Brazil, Russia, India, China and South Africa and whose members also include Egypt, Ethiopia, Indonesia, Iran and the United Arab Emirates.

The UK, bar a massive shock U-turn, should be exempt.

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What does the UK-US trade deal involve?

The country was the first to be granted a trade deal, of sorts, in May and the Trump administration has claimed many others had been offering concessions since the clock ticked down to 9 July.

The UK is not expected to face any changes to its current 10% rate due to the trade truce, which came into effect last week.

While UK-made cars aerospace products face no duties under a new quota arrangement, it still remains to be seen whether 25% tariffs on UK-produced steel and aluminium will be cancelled.

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Can the UK avoid steel tariffs?

They could, conceivably, even be raised to 50%, as is currently the case for America’s other trading partners, because no agreement on eliminating the rate was reached when the government struck its deal in May.

It all amounts to more uncertainty for the UK steel sector.

A No 10 spokesman said on Monday: “Our work with the US continues to get this deal implemented as soon as possible.

“That will remove the 25% tariff on UK steel and aluminium, making us the only country in the world to have tariffs removed on these products.

“The US agreed to remove tariffs on these products as part of our agreement on 8 May. It reiterated that again at the G7 last month. The discussions continue, and will continue to do so.”

China and Vietnam have also secured some US concessions.

The dollar strengthened but US stock markets lost ground in the wake of the letters to Japan and South Korea being made public, with the broad-based S&P 500 down by 1%.

Stock markets in both Japan and South Korea were closed for the day but US-traded shares of SK Telecom and LG Display were down 7.5% and 5.8% respectively.

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Tesla shares sink as Musk launches political party

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Tesla shares sink as Musk launches political party

Shares in Elon Musk’s Tesla have reversed sharply over renewed concerns about his focus on the company’s recovery as he plots against Donald Trump.

Shares in the electric car firm plunged by more than 7% at the start of trading on Wall Street – taking about $71bn (£52bn) off its market value.

The stock has often come under pressure since Musk started his association with the president, latterly helping bring down federal government costs through a new department known as DOGE (Department of Government Efficiency).

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But it is now suffering as their political relationship has soured.

Musk has publicly opposed the so-called “big, beautiful bill” – Mr Trump’s flagship tax cut and spending plans that received Congressional approval last week – since he left his DOGE role.

Musk wrote in a post on his X platform on 30 June: “It is obvious with the insane spending of this bill, which increases the debt ceiling by a record FIVE TRILLION DOLLARS that we live in a one-party country – the PORKY PIG PARTY!!”

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Once the bill was passed, he created a poll on X, asking people if they would want him to launch the America Party.

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Musk v Trump: ‘The Big, Beautiful Breakup’

He wrote on 4 July: “Independence Day is the perfect time to ask if you want independence from the two-party (some would say uniparty) system!”

The vote ended with 65.4% in favour of creating the party.

The formation of the America Party was announced the following day.

“By a factor of 2 to 1, you want a new political party and you shall have it! When it comes to bankrupting our country with
waste & graft, we live in a one-party system, not a democracy.”

“Today, the America Party is formed to give you back your freedom,” Musk posted.

Trump responded on his Truth Social account: “I am saddened to watch Elon Musk go completely ‘off the rails,’ essentially becoming a TRAIN WRECK over the past five weeks.

“He even wants to start a Third Political Party, despite the fact that they have never succeeded in the United States –
The System seems not designed for them.”

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Trump threatens to ‘put DOGE’ on Musk

Trump has previously threatened to go after Tesla‘s government subsidies and contracts through the DOGE department to save “big” as their relationship deteriorated.

Such threats have also pressured the share price at Tesla.

It has suffered throughout Trump 2.0 and, in fact, has trended lower since last December – shortly after Mr Trump’s election win was confirmed.

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The Trump-Musk bust-up that everyone knew was coming
Musk hits out at Tesla succession claim

The possibility of tariff hits to the business, followed by actual tariff disruption, along with a consumer and investor backlash against Musk’s previous DOGE role have contributed to a 35% decline on the December peak.

The very absence of Tesla’s CEO dragged on the shares.

Tesla sales suffered globally as the trade war ramped up due to the imposition of tariffs by a government he supported, until the public row between him and the president began in early June.

Musk had only just renewed his 100% focus on Tesla and his other business interests by that time.

Tesla sales were down during the presidential election campaign last year and continued to decline, on a quarterly basis, during the first half of 2025.

Neil Wilson, UK investor strategist at Saxo Markets, said of the company’s share price woes: “Investors are worried about two things – one is more Trump ire affecting subsidies and the other more importantly is a distracted Musk.

“Investors had cheered Musk stepping back from frontline politics but are now worried he’s going to sucked back in and take his eye off Tesla.”

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Post Office scandal: Victims say government’s control of redress schemes should be taken away

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Post Office scandal: Victims say government's control of redress schemes should be taken away

Post Office scandal victims are calling for redress schemes to be taken away from the government completely, ahead of the public inquiry publishing its first findings.

Phase 1, which is due back on Tuesday, will report on the human impact of what happened as well as compensation schemes.

“Take (them) off the government completely,” says Jo Hamilton OBE, a high-profile campaigner and former sub-postmistress, who was convicted of stealing from her branch in 2008.

“It’s like the fox in charge of the hen house,” she adds, “because they were the only shareholders of Post Office“.

“So they’re in it up to their necks… So why should they be in charge of giving us financial redress?”

Jo Hamilton OBE, a high-profile campaigner and former sub-postmistress
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Nearly a third of Ms Hamilton’s life has been dominated by the scandal

Jo and others are hoping Sir Wyn Williams, chairman of the public statutory inquiry, will make recommendations for an independent body to take control of redress schemes.

The inquiry has been examining the Post Office scandal which saw more than 700 people wrongfully convicted between 1999 and 2015.

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Sub-postmasters were forced to pay back false accounting shortfalls because of the faulty IT system, Horizon.

At the moment, the Department for Business and Trade administers most of the redress schemes including the Horizon Conviction Redress Scheme and the Group Litigation Order (GLO) Scheme.

The Post Office is still responsible for the Horizon Shortfall scheme.

Lee Castleton OBE, a victim of the Post Office Horizon scandal
Image:
Lee Castleton OBE

Lee Castleton OBE, another victim of the scandal, was bankrupted in 2007 when he lost his case in the civil courts representing himself against the Post Office.

The civil judgment against him, however, still stands.

“It’s the oddest thing in the world to be an OBE, fighting for justice, while still having the original case standing against me,” he tells Sky News.

While he has received an interim payment he has not applied to a redress scheme.

“The GLO scheme – that’s there on the table for me to do,” he says, “but I know that they would use my original case, still standing against me, in any form of redress.

“So they would still tell me repeatedly that the court found me to be liable and therefore they only acted on the court’s outcome.”

He agrees with other victims who want the inquiry this week to recommend “taking the bad piece out” of redress schemes.

“The bad piece is the company – Post Office Limited,” he continues, “and the government – they need to be outside.

“When somebody goes to court, even if it’s a case against the Department for Business and Trade (DBT), when they go to court DBT do not decide what the outcome is.

“A judge decides, a third party decides, a right-minded individual a fair individual, that’s what needs to happen.”

Pic: AP
Image:
Pic: AP

Mr Castleton is also taking legal action against the Post Office and Fujitsu – the first individual victim to sue the organisations for compensation and “vindication” in court.

“I want to hear why it happened, to hear what I believe to be the truth, to hear what they believe to be the truth and let the judge decide.”

Neil Hudgell, a lawyer for victims, said he expects the first inquiry report this week may be “really rather damning” of the redress claim process describing “inconsistencies”, “bureaucracy” and “delays”.

“The over-lawyeringness of it,” he adds, “the minute analysis, micro-analysis of detail, the inability to give people fully the benefit of doubt.

“All those things I think are going to be part and parcel of what Sir Wynn says about compensation.

“And we would hope, not going to say expect because history’s not great, we would hope it’s a springboard to an acceleration, a meaningful acceleration of that process.”

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June: Post Office knew about faulty IT system

A Department for Business and Trade spokesperson said they were “grateful” for the inquiry’s work describing “the immeasurable suffering” victims endured.

Their statement continued: “This government has quadrupled the total amount paid to affected postmasters to provide them with full and fair redress, with more than £1bn having now been paid to thousands of claimants.

“We will also continue to work with the Post Office, who have already written to over 24,000 postmasters, to ensure that everyone who may be eligible for redress is given the opportunity to apply for it.”

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