Innovating on GBP liquidity requirements

With the UK possibly standing on shaky ground when it comes to its Moody’s-imposed AAA sovereign rating, it’s to be expected that some UK gilt holders could be getting jittery.

A reasonable alternative for someone operating within the GBP-denominated repo market with a need to hedge against widening GBP-Libor spreads and/or sovereign risk might then be GBP-denominated paper issued by a AAA-rated supranational like the European Investment Bank.