At the end of 2013 the real yields that the UK government had to pay on its debt were negative over the whole curve. Several possible explanations are available for this phenomenon – central bank action, regulatory changes, demographic developments and economic conditions. The first two can result from deliberate interaction by the state into the financial markets and can be labelled as financial repression. We explain the historic precedents for Governments to use financial repression to manage their debt, look into the influence of regulation on asset allocation for insurers and pension funds, and introduce the concept of a balance-sheet recession.
