Hedge funds warn BoE repo reforms could backfire

By Phoebe Seers and Iain Withers LONDON, Oct 7 (Reuters) A hedge fund industry group has warned the Bank of England that proposed reforms to the market for short-term loans secured against UK government bonds, known as repo , could backfire and reduce liquidity at times of market stress. Industry body Alternative ​Investment Management Association wrote to the BoE this month in a letter, seen by Reuters, that ‌implementing proposed central clearing in the market could create new vulnerabilities and expose investors to more volatility. It marks a more direct warning after the lobby s response last year to the central bank s initial proposals, which flagged significant structural issues. A global bond market selloff has put soaring borrowing costs in the spotlight, including in Britain, where 30-year yields on government bonds, or gilts, jumped to their highest since 1998 earlier ‌this ​month. Supervisors and financial authorities are watching closely the growing role of hedge fun