26. In June 1998 when the agreement to provide a Government guarantee was given, sterling market conditions were reasonably stable, and it was expected that the bonds could be issued at a relatively small premium over Gilts, perhaps similar to that for KfW or EIB. However, the end of Q3 and all of Q4 saw the full brunt of the Russian crisis hit the markets followed by the near failure of LTCM, a major hedge fund. As described below, all bond spreads widened dramatically. The flight to quality drove down Gilt yields.