Bank of England to end the bond-buying program on Friday

on Oct 14, 2022
  • BoE governor says the bond purchase was a temporary stability program
  • BoE to end the emergency bond-purchase program
  • Pension schemes want bond-purchase program extended

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On Wednesday morning, the British pound rebounded due to conflicting information on the completion of the Bank of England’s temporary bond-buying program.

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BoE Governor Andrew Bailey thinks of it as a temporary fiscal stability program. The comments initially sent the British pound lower but rebounded following reports that BoE has signaled its willingness to extend the emergency bond purchase program.

BoE to end the emergency bond-purchase program

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The Financial Times report came at the back of the governor’s comments that affirmed that the BoE would terminate the emergency rescue program on October 14, as planned. A BoE spokesperson confirmed that from the beginning, the central bank made it clear that the measures, which were temporary and focused on buying bonds, would end this Friday.

The spokesperson said;

The Governor confirmed this position yesterday, and it has been made absolutely clear in contact with the banks at senior levels. Beyond October 14, a number of facilities, including the new TECRF, are in place to ease liquidity pressures on LDIs.

On September 23, the British government unveiled a radical financial proposal, dubbed the “mini-budget,” that featured unfunded tax breaks. as a result, investors dumped the sterling and abandoned British bonds because of the action, which plunged capital markets into meltdown.

The BOE announced late last month that it would postpone its intention to sell government-backed bonds and purchase long-dated bonds over two weeks as a drastic action to stabilize the markets and stop the sell-off.

Pension schemes want bond-purchase program extended

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According to Deputy Governor Jon Cunliffe’s letter to a congressman last week, some pension schemes were just hours from collapsing until the BOE intervened.

Since BoE has twice increased the size of its rescue plan, the government has reversed its position on a proposal to slash taxes for the wealthiest citizens.

Surprisingly the Pensions and Lifetime Savings Association has asked for an extension of the intervention beyond October 14. According to PLSA, if the bank stops the bond purchase, it should put measures in place to manage market volatility. Pension funds have been calling for an extension of the purchasing period.


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