The Bank of England (BoE) today announced that it has delayed its gilt sell-off and has begun buying up long-dated UK government bonds to offset volatility in markets.
Markets have suffered since chancellor Kwasi Kwarteng announced his new fiscal policy last week, with the pound falling to near-record lows against the dollar on Monday.
Today the Bank of England announced the temporary purchases of long-dated UK government bonds. The BoE’s buying spree will continue until 14 October at “whatever scale is necessary” to return orderly market conditions.
“The purchases will be unwound in a smooth and orderly fashion once risks to market functioning are judged to have subsided,” the Bank said in a statement.
The new tax-cutting plans will result in a significant increase to UK debt, which has resulted in a sharp drop from international investors and massive sell-offs in the UK bond market over the past week.
The central bank said that if “dysfunction in this market were to continue or worsen, there would be a material risk to UK financial stability”.
It added that the quantitative tightening programme of selling £80bn worth of bonds remains “unchanged” but has been postponed until 31 October.