The Bank of England has said it will further bolster its emergency bond-buying plan
The Bank of England has said it will further bolster its emergency bond-buying plan as it warned an ongoing rout in the gilts market poses a “material risk to UK financial stability”.
The central bank said it will now widen the scope of its UK government bond-buying programme, which was launched in the wake of the mini-budget market turmoil, to include purchases of index-linked UK government bonds amid concerns over another “fire sale” of gilts.
It comes after the sell-off in government bonds – also known as gilts – resumed on Monday as investor concerns failed to subside despite action by the Bank of England to double its daily bond-buying limit and Chancellor Kwasi Kwarteng’s move to bring forward his new fiscal plan and independent economic forecasts to October 31.
Long-dated gilt prices tumbled, which sent yields on 30-year bonds soaring to 4.7% on Monday – their highest level since the Bank of England was forced to step in last month to avoid a mini financial market crisis.
The Bank said: “The beginning of this week has seen a further significant repricing of UK government debt, particularly index-linked gilts.
“Dysfunction in this market, and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to UK financial stability.”
It added that its latest efforts will “act as a further backstop to restore orderly market conditions”.
Published: by Radio NewsHub