Britain’s FTSE 100 index closed down 0.3% after going lower earlier during the day and the FTSE 250 closed flat, up 0.097% after another turbulent day on British markets. In a highly unusual intervention, the Bank of England stepped in to buy long-term government debt amid the continuing financial meltdown sparked by Kwasi Kwarteng’s ‘mini-budget’.
The Bank said it would step in for ‘temporary and targeted purchases in the gilt market’ due to risks to Britain’s ‘financial stability’. In a statement, the Bank of England said, “Repricing has become more significant in the past day – and it is particularly affecting long-dated UK government debt.
“Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. ”
Reports suggested that British pension funds could have collapsed had the Bank not made its move. Bond markets recovered in the wake of the announcement, but the Pound fell once again, dropping by around 1.6% in midday trading.
Mike Owens, from Saxo Markets said, “This move from the Bank of England won’t stem moves against the UK debt and currency markets on their own. It’s a narrowly defined intervention that hopes to dampen the current shocks.
“We’re told that the Bank is meeting with the Treasury routinely week-on-week, and so now the focus will swing back to how the government plan to convince the market that their expansionist policy will provide the growth necessary to balance the UK’s finances.”
Companies in the finance sector remained under pressure thanks to fears over pension funds and the Bank’s unusual intervention, with Aviva (GB:AV) down 6.2% in trading.
British business news today
Bank of England goes into full crisis management mode (FT)
Tougher mortgage rules add to pain for borrowers (Times)
How chaos in pension funds forced Bailey to step in (Telegraph)
