To date, just £5 billion out of a potential £65 billion has been spent, but the Bank says it will double the amount it can spend daily to £10 billion in the last four days of emergency intervention.
As it enters the final days of its emergency bond purchasing plan, the Bank of England has stated it will double the amount of UK government bonds it can purchase to bolster the pension market and alleviate fears of a cliff edge ending.
The Bank has stated that it is willing to purchase £10bn worth of bonds per day, which is double the £5bn per day it announced on 28 September – a move that it stated would terminate on 14 October.
The state uses gilts, sometimes known as government bonds, to raise revenue.
How are bonds distinct from gilts, and what role do they play in the mini-budget crisis?
In response to chancellor Kwasi Kwarteng’s declaration of a mini-budget, the Bank announced its temporary and emergency buying program of long-dated gilts, which will be repaid in 20 to 30 years.
The market instability caused by the mini-budget prompted an extraordinary action by the regulator to avoid a portion of the pension market from collapsing when gilt interest rates increased.
The Bank announced on Monday that only £5 billion has been spent throughout eight days of the thirteen-day bond purchase up.
The Bank noted that the emergency step was made to avoid the risk of “contagion to credit conditions for UK families and enterprises.
Now, it has stated that it is willing to increase its purchases until the measure expires on Friday, using the £65bn set aside for the scheme.
The news will be interpreted as an effort to calm the market and alleviate concerns that it will react again when the program concludes.
In an additional effort to strengthen the pensions market, but without extending the bond-buying program, the Bank has announced a new temporary but open-ended tool to assist banks with liquidity challenges in dealing with the troubled segment of the pensions market.
