UK panic over ending Bank of England debt purchases

The Bank of England (BoE) maintains its position of termination Intervention in the bond marketDespite press reports about the extension, which once again unleashed investor nervousness and high public debt rates.

The mixed signals pushed the price of UK 30-year Treasuries above 5%, a level not seen in 20 years, and an indication of loss of confidence An investor in British economic policy.

“As the (central) bank clearly indicated from the beginning, temporary and voluntary purchases of Treasury bonds will end on October 14,” the source announced in a statement. And the financial institution added, “The governor confirmed this position yesterday (Tuesday), and this became clear in contacts with banks at the highest level.”

On Wednesday, the Financial Times reported, citing anonymous sources, that the central bank had “secretly told bankers that it could Extend your emergency program To buy bonds after the Friday deadline “if market conditions so require.

The London market is facing a cycle of financial instability since the announcement of the budget plan involving heavy borrowing, announced by the government led by Prime Minister Liz Truss. This program runs counter to the central bank’s mandate to fight record inflation close to 10% in the UK.

In an effort to calm markets and face a “significant risk to the UK’s financial stability”, the monetary institution had to intervene from 28 September buy treasury bonds In the long run, I was able to stop the increase in yield.

But then, the yield renewed the upward trend, which means that the prices of these bonds will fall. This rise in 30-year Treasury yields is generating significant destabilization in the UK as it affects the financial economy.pension funds.

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In a statement on Tuesday, the British Pension Fund Association (PLSA) urged the issuer to extend its intervention until the next budget presentation on October 31, when economists and investors expect to see a change of direction in matters of fiscal and savings actions.

The Bank of England said on Wednesday that it does not directly oversee pension funds and said that “lessons must be learned” from the current crisis and that “adequate levels of resistance must be created” for market players.

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