Bank of England suspends tightening policy as pound soars; central bank begins buying long-term UK government bonds
The Bank of England has decided to intervene in the bond market after the past few days of highly volatile European markets and the rapid depreciation of the euro and pound against the US dollar. Yields on British government bonds have been volatile and the pound has fallen to a record low against the dollar. On Wednesday, the Bank of England said it was monitoring “significant repricing” of UK assets very closely.
Bank of England reopens stimulus flood gates — central bank intervenes in UK bond market
The Bank of England (BOE) on Wednesday said it would temporarily start buying long-term government bonds, pausing the central bank’s recent quantitative tightening tactics. Two days ago, Britain’s legal tender, the pound sterling, fell to an all-time low against the US dollar, with the pound plummeting to his 1.0541 nominal US dollar per unit during Wednesday’s early morning (ET) trading session. did.
Yields on UK government bonds have surged recently and suffer from the same volatility as US Treasuries. UK yields posted their biggest rise since 1957, and the BoE said in a statement Wednesday that it was monitoring the situation very closely. “If this market dysfunction persists or worsens, it will pose material risks to the UK’s financial stability,” the BOE said Wednesday.
“This would lead to an undue tightening of funding terms and a reduction in the flow of credit to the real economy. We are ready to mitigate the risk of contagion to our credit standing.”
The BOE’s action follows a similar move by the Bank of Japan six days ago. Japan’s central bank has decided to intervene in the foreign exchange market after the Japanese yen fell to his 24-year low. The yen rallied after the intervention, and the pound sterling also rallied against the dollar on Wednesday following his BOE’s announcement to begin temporary purchases of UK long-term government bonds.
At the time of writing, the pound is trading at 1.0661 nominal USD per unit, down 0.61% over the past 24 hours. The BOE detailed that it planned to intervene “on the necessary scale” to “restore orderly market conditions”.
What do you think of the Bank of England’s intervention in the UK bond market? What do you think of the pound’s performance against the US dollar? Let us know your thoughts on the matter in the comments section below.
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Bank of England suspends tightening policy as pound soars; central bank begins buying long-term UK government bonds
Source link Bank of England suspends tightening policy as pound soars; central bank begins buying long-term UK government bonds
