Investors are warning that the UK government's plan for heavy issuance of long-dated gilts is structurally unsustainable and would be forced to scale back if political uncertainty resurfaces. The concern centers on demand absorption at the long end of the curve, where the market has previously shown fragility, most notably during the 2022 LDI crisis, and where international investor appetite remains sensitive to fiscal credibility signals.
For Armada's traditional repo desk, long-dated UK gilts used as collateral by European or UK-domiciled counterparties such as asset managers or banks carry duration and liquidity risk that would intensify under a disorderly gilt selloff. Repo haircuts on long-dated sovereigns would need to widen to reflect mark-to-market volatility, and any counterparty holding gilts as margin collateral could face margin calls that stress the broader bilateral book.