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People walking outside the Bank of England, in the financial district known as The City, in London, UK, October 7, 2022. /CFP
The Bank of England (BOE) acted again on Tuesday to stem a sharp sell-off in Britain's 2.1 trillion-pound ($2.31 trillion) government bond market by announcing the purchase of inflation-linked debt until the end of this week.
Citing a "material risk" to financial stability arising from a rout in British government bonds – known as gilts – the BOE said it would buy up to 5 billion pounds of index-linked debt per day, starting Tuesday.
Rather than increase the existing commitment to buy up to 10 billion pounds of gilts each day, as announced on Monday, the purchases will run alongside existing purchases of long-dated conventional bonds, now worth up to 5 billion pounds.
British inflation-linked gilts – known as linkers – suffered a massive sell-off on Monday, despite the BOE doubling the maximum size of its buybacks of conventional long-dated gilts.
"The beginning of this week has seen a further significant repricing of UK government debt, particularly index-linked gilts," the BOE said in a statement.
"Dysfunction in this market, and the prospect of self-reinforcing 'fire sale' dynamics pose a material risk to UK financial stability," it added.
In more positive news, official data on Tuesday revealed British unemployment fell to a near 50-year low at 3.5 percent in the three months to August. However, the drop was driven by a record jump in the number of people leaving the labor market, which may add to inflation pressures.
(Sources: Reuters, AFP with edits)
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Disinformation report hotline: 010-85061466