Who owns UK Government Debt?

Insurers and pension funds were the captive buyer for decades. Their share has fallen. The Bank's wedge appears in 2009, when quantitative easing started, and it has been shrinking since 2022 as the Bank lets gilts mature and sells some. Overseas holders are about a third. Households are about a tenth of one percent.

There is no public table of who holds each maturity. Pension funds, banks and overseas investors are published only for the market as a whole. A register that says "Belgium" or "Luxembourg" is naming a custodian — Euroclear or Clearstream — not the saver who owns the bond. Comments you may have read about hedge funds describe their share of trading, which is not the same as their share of the stock.

The chart above is the stock: who owns the gilts on a quarter-end, at market value. Overseas investors, insurers and pension funds, and the Bank of England are the bulk of it. Owning a large share is not the same as setting today's price. The price is set by the next trade.

Along the curve, the natural holders are different, and so are the people who deal at the margin. This split is not published bond by bond. It is the pattern the market is built around.

The short end, out to about seven years, is where banks, money-market funds and overseas reserve managers keep cash they may need back. The price does not swing much. It is also the part of the curve that sits closest to Bank Rate, so it is where a change in the policy rate shows up first.

The belly, roughly seven to fifteen years, is the most traded stretch, and the ten-year point is the one in the headlines. Asset managers, overseas private investors and the dealers themselves live here. They are often the price setters on an ordinary day, even when they are not the largest holders. A view about where Bank Rate is going over the next few years is a trade in the belly.

The long end, past fifteen years, together with index-linked gilts, was built for defined-benefit pension schemes and insurers. Their liabilities run for decades, and a long gilt lines the income up. They still hold a great deal of the stock. The bid at the margin is thinner than it was, because those schemes have closed and are running off. When they are sellers rather than buyers, the long end can move a long way without much stock changing hands. That is what happened in September 2022.

On a quiet day the price is set by a gilt-edged market maker quoting a bid and an offer, and by whichever client hits it: often an asset manager or an overseas investor, in modest size. In size, it is whoever has to deal. A pension scheme rebalancing. A reserve manager. The Bank itself, when it is selling gilts out of the Asset Purchase Facility. Hedge funds turn up in the commentary because they trade a great deal relative to what they hold. Their holding is not a separate line in this chart. The Debt Management Office does not set the yield either. It chooses how much to sell. The bids choose the rate, which is the subject of gilt auctions.