The Bank of England has hit the panic button yet again, moving to further bolster its emergency bond-buying plan. It's an attempt to stop tumbling government bond prices causing a market collapse.
The central bank warned the ongoing annihilation in the gilts market poses a “material risk to UK financial stability”. It will now widen the scope of its UK government bond-buying programme, which was launched in the wake of the mini-budget market turmoil, to include purchases of index-linked UK government bonds amid concerns over another “fire sale” of gilts.
It comes after the sell-off in government bonds – also known as gilts – resumed on Monday as investor concerns failed to subside despite action by the Bank of England to double its daily bond-buying limit and Chancellor Kwasi Kwarteng’s move to bring forward his new fiscal plan and independent economic forecasts to October 31. Read more:'Fascinating' emerging city centre neighbourhood named in 'best places to live' list Long-dated gilt prices tumbled, which sent yields on 30-year bonds soaring to 4.7% on Monday – their highest level since the Bank of England was forced to step in last month to avoid a mini financial market crisis.
The pound also fell to 1.10 US dollars as the two-pronged attack by the Bank and Chancellor did little to soothe market worries.