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BoE begins buying gilts to ‘restore orderly market conditions’

28 September 2022

The central bank delayed its planned gilt sell-off to focus on buying up UK government bonds at “whatever scale is necessary”.

By Tom Aylott,

Reporter, Trustnet

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.

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