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Bank of England to buy 65 billion pounds of UK bonds to stem rout
The Bank of England stepped into Britain's bond market to stem a market rout, pledging to buy around 65 billion pounds ($69 billion) of long-dated gilts after the new government's tax cut plans triggered the biggest sell-off in decades.
www.reuters.com
After warning of “a material risk to the U.K. financial stability” the Bank of England have stepped in “to stem a market rout”, pledging to buy 65 billion pounds (£5b per day for the next 13 days) of gilts “after the government tax cuts triggered the biggest sell off in decades” (Reuters).
The threat is to pension schemes (so insurance companies) which operate LDIs (liability driven investment funds) who are running out of cash because of the market falls in the last few days and are at risk of collapsing. The 65bn spend is designed to give them a breathing space to get out of the derivatives.
It sounds like 2008 all over again, but this time involving insurance companies rather than banks. And the other difference obviously is that this crisis hasn’t been caused by junk bonds in the US. It began last Friday after the so called “mini budget”.