Bank of England announced a plan to conduct temporary purchases of longer-dated gilts “to restore orderly market conditions.” The announcement gave a brief boost to the pound, but the move was retraced entirely, sending Sterling to a fresh session low.
BOE will buy bonds with +20-year maturity starting today
Up to GBP5 billion per action initially
Parameters under review (sizes could be changed)
First auction today between 1400-1430 GMT (3:30 pm in London, 1030 am in NY)
UK yields have fallen since the details were announced a few minutes ago and GBP has strengthened and reversed
The combination of today’s QE from the Bank of England and Kwarteng’s promises to bankers to put the UK on a path to medium term fiscal stability appear to have done the trick.
UK 30-year yields are at a new session low at 4.15%.
Bloomberg reports that it was collateral calls and warnings of contagion that prompted the move.
The Bank had been warned by investment banks and fund managers in recent days that the collateral requirements could create a situation in which forced selling drove up the yield on UK debt, the person said, asking not to be named discussing the central bank’s deliberations.