The Bank of England announced on Tuesday that it was extending its purchases of British debt to “indexed bonds”, due to the persistent “dysfunctions” in the markets, which had been plunged into turmoil by the presentation of a vast package of budgetary measures from the government of Liz Truss.
The monetary institute had launched on September 28 a program to buy back long-term Treasury bills of up to 65 billion pounds, and had already increased the maximum size of its daily redemptions to 10 billion pounds on Monday, among other measures.
Despite Monday’s announcements, the dysfunctions which continued in particular on this market for good indexes posed a significant risk to the financial stability of the United Kingdom, noted the Bank of England in a press release.
The central bank’s intervention to calm the treasury bill market, which was at risk of a liquidity crisis and threatened to spill over to credit conditions for households and businesses, runs until Friday, as previously announced.
The transactions unveiled on Tuesday will serve as an additional safety net to restore orderly market conditions, the Bank of England said.
The bank’s shares are particularly targeting long-term British Treasury bill derivatives (LDI) funds, some of which are at risk of going bankrupt due to a sudden collapse in the value of long-term Treasury bills, associated with a surge in interest rates. state loan.
The Bank of England (BoE) announced on Monday that it had so far only bought back 5 billion pounds of bonds.
The new government of Liz Truss had frightened the financial markets by presenting on September 23 a mini-budget consisting of vast support for electricity bills combined with significant tax cuts, without these actions being fully quantified or financed.
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The executive had also tried to reassure investors on Monday.
The Chancellor of the Exchequer Kwasi Kwarteng has advanced, in the face of repeated calls from economists and parliamentarians, for the publication of budget forecasts for 31 October, instead of the 23 November initially planned.
In parallel, it will publish medium-term measures to ensure that British public finances remain on a sustainable path.
Investors were not reassured, however, given the 30-year government borrowing rates, which continued to climb throughout the session on Monday, reaching 4.68% at the end of the month. session at 4:00 p.m. GMT, showing distrust of the British debt.