BoE says ready to extend emergency bond purchases-FT | Photo credits: Tolga Akmen/AP/SIPA
Oct 12 (Reuters) – The Bank of England (BoE) has advised banks that it is ready to extend its emergency bond buying program beyond Friday if market conditions warrant, reported the Financial Times (FT) on Wednesday, citing three sources.
The newspaper reports the news as BoE Governor Andrew Bailey said late Tuesday that Britain’s central bank has no plans to extend its bond purchases beyond Friday, when those purchases will take place. have to stop.
The pound sterling took 0.4% after the information from the FT.
By buying bonds, the BoE is seeking to end what it sees as a bond market ‘dysfunction’ as pension funds have been forced to post large amounts of emergency collateral in liability-based investments (LDI), after the sharp fall in the price of British sovereign bonds.
“They (central bank officials) told us that they were watching LDI’s managers closely to determine if they had been successful in generating enough cash for their clients to meet margin calls, and would decide to extend the facility Thursday or Friday,” writes the FT quoting a banker.
The Bank of England announced on Tuesday that it would buy inflation-linked British government bonds until the end of the week, a new intervention aimed at stabilizing the debt market. (Report Shubham Kalia in Bangalore; French version Claude Chendjou, edited by Tangi Salaün)