Bank of England purchases long-term bonds

  • In order to ease the market turmoil brought on by the incoming government’s so-called mini-budget, the Bank of England will postpone starting its planned gilt sale next week and start temporarily purchasing long-dated bonds.
  • As investors fled British fixed income markets in the wake of the new fiscal policy announcements, yields on U.K. government bonds, also known as «gilts”, were on track for their biggest monthly increase since 1957.
  • On Wednesday, the Bank’s Financial Policy Committee decided to take immediate action after acknowledging that the malfunction in the gilt market constituted a significant risk to the nation’s financial stability, as financing conditions would become tougher and the amount of credit flowing into the real economy would decrease.
  • The first gilt sales, originally scheduled for Monday, will now take place on October 31st in accordance with the Monetary Policy Committee’s aim of a yearly £80 billion ($85 billion) decrease of its holdings of gilts, according to the bank.