The Bank of England plans to proceed with measures to limit hedge fund leverage in the gilt market, aiming to strengthen financial resilience. This move represents a significant regulatory shift targeting one of the UK's most important government bond markets.

Regulators have faced pushback over concerns that the restrictions could increase funding costs for market participants. Critics argue the measures may inadvertently reduce liquidity in gilt trading while attempting to mitigate systemic risks.

The gilt market's stability matters enormously to UK government financing and pension funds. Hedge funds' leveraged positions can amplify market volatility during stress periods, making them targets for post-crisis reforms.

Despite industry resistance, the Bank appears committed to implementing these changes. The tension reflects broader debates about balancing market efficiency against financial stability following recent episodes of bond market turbulence.