Daily Management Review

Bank of England to start buying government bonds for market recovery


According to a statement posted on the bank's website, the Bank of England (the British central bank) will begin purchasing long-term U.K. government bonds to stabilize the market and prevent financial instability in the midst of the bond market crisis. The program will last for the next six months.

Photo by George Rex
Photo by George Rex
"The bank will start making short-term purchases of long-term UK government bonds on September 28 in order to accomplish the financial stability. These purchases will be made in order to bring the market back to order," reads the message.

According to information on the website, the operation will be carried out on the scale required to settle the market situation and would be completely reimbursed by the Ministry of Finance. The purchases of bonds will be clearly time-limited because they are intended to address a particular issue in the market for long-term government bonds. The sale auctions will start on September 28 and terminate on October 14, according to the statement.

The regulator also reaffirmed its readiness to adjust the discount rate by the required number of basis points in order to achieve 2% inflation over the medium term. The committee's objective to reduce the stock of bought government bonds by 80 billion pounds hasn't changed.

source: ft.com