Breaking News
Investing Pro 0
🚨 Our Pro Data Reveals the True Winner of Earnings Season Access Data

Gilts Surge as Bank of England Pivots Back to Bond-Buying

Economy Sep 28, 2022 23:56
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters

By Geoffrey Smith 

Investing.com -- U.K. government bonds rallied sharply on Wednesday after the Bank of England dropped its plans to tighten monetary policy further by selling bonds from the portfolio it built during years of 'quantitative easing'.

By 09:35 ET (13:35 GMT), the yield on the 10-year benchmark Gilt had fallen back to 4.07%, having hit a high of 4.63% earlier in the day as markets reacted with dismay to the International Monetary Fund's criticisms of the new government's borrowing plans. 

U.K. government borrowing is set to rise from its baseline by over 60 billion pounds over the next six months alone, thanks to a suite of tax cuts and energy subsidies that were the first policies to be announced last week by Prime Minister Liz Truss and her Chancellor of the Exchequer, Kwasi Kwarteng. 

The Bank of England said in a statement it will intervene to restore order in a Gilt market that was rapidly spiraling out of control.

"The purpose of these purchases will be to restore orderly market conditions," the Bank said. "The purchases will be carried out on whatever scale is necessary to effect this outcome. The operation will be fully indemnified by HM Treasury."

The Bank had planned to sell a net 10 billion pounds in the final quarter of the year as part of its broader tightening of monetary policy to rein in inflation that was running at 9.9% in August.

Its reversion to a stance that is tantamount to quantitative easing had a negative effect on the pound, however. Having risen as high as $1.0731 earlier in the day, by 09:35 ET (13:35 GMT), it was back down at $1.0644, down 0.8% on the day. 

Earlier, Sky News had quoted unnamed sources as saying that Kwarteng had pleaded with London financiers in a meeting that they refrain from speculating against the pound.

Gilts Surge as Bank of England Pivots Back to Bond-Buying
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email