Selling of British government bonds accelerated on Wednesday, pushing long-term borrowing costs higher after the Bank of England reiterated plans to halt its planned emergency gold purchases on Friday.
“From the beginning, the central bank made it clear that the temporary and targeted purchase of gold coins will end on 14 October,” the central bank said Wednesday morning.
The BoE added, “We have been in contact with senior level banks and have made it completely clear that we will finish the plan within this week.”financial times previously reported on Wednesday BoE officials have privately explained to lenders that they are ready to extend the program beyond Friday’s deadline if market volatility rises again.
UK 30-year yields rose 0.2pts to 5% as selling accelerated after the BoE announcement. Long-term interest rates are now approaching the levels at which central banks began their first interventions. gold leaf Yields on bonds rise as prices fall.
The latest matches on sale will come after BoE Governor Andrew Bailey warned the pension fund late Tuesday that it had “three more days” before the aid ended.
“Lack of certainty creates real challenges [for trustees]Andrew Coles, CEO of pension advisory firm Aisio, said: “On the one hand, we have the official line that the deadline is Friday, and then leaks that if the market reacts, we may intervene. does not give certainty to
The bank’s chief economist, Hugh Pill, followed up on Bailey’s message on Wednesday, arguing that the BoE should remain focused on its main goal of fighting inflation.
“If monetary policy is to be redirected in a direction aimed at financial stability . It will also be,” Pill said in a speech in Scotland. He suggested the BoE is likely to raise interest rates significantly next month in response to underfunded tax cuts made by Prime Minister Kwasi Kwarten in his September.
of lb The pound fell 0.8% against the dollar at $1.105 in London morning trading after falling sharply after Bailey’s speech in Washington on Tuesday night.
The Bank of England has rushed to stem the impact of Quanteng’s tax-cut package, sending sterling and gold markets plummeting and triggering a liquidity crisis for pension funds.
The central bank made two more emergency interventions earlier this week, increasing the maximum size of purchases and expanding them to include inflation-protected bonds. With three days of buying until Friday, the central bank has bought £8.8bn of bonds, well below the potential size of his £65bn programme.
“Everyone seems to be building boats at sea,” said Richard McGuire, a fixed income strategist at Rabobank.
He added that the lack of clarity on the BoE’s intentions exacerbates the information gap on how the government plans to borrow on a sustainable basis.
“All of these uncertainties and shifts are bad from a market perspective,” McGuire said. is desperately trying to cover up. “
Kwarteng is set to unveil a medium-term plan on how to reduce its debt on October 31, but Prime Minister Liz Truss told parliament Wednesday that the government will not cut spending. .
“We will see the debt decrease in the medium term,” Truss said. “But we will do it not by cutting public spending, but by using public funds wisely.”
Britain’s business secretary, Jacob Rhys-Mogg, told the BBC that he blamed the BoE, not the government, for the market turmoil.
“It’s not necessarily the mini-budget that has impacted pension funds because of their rather risky but unlikely investment strategies,” the minister said. “The fact that the Bank of England did not raise interest rates as much as the Federal Reserve did the previous day is just as easily conceivable.”
The Bank of England raised interest rates from 0.5% to 2.25% on 22nd September. This is the day after the Fed implemented his 0.75% rate hike for the third time in a row in the US.
https://www.ft.com/content/7d2da677-6284-4e36-b7a0-efcb52ed67b0 Gilts put up for sale as Bank of England reiterates plans to end bond-buying scheme