The Bank of England has purchased £19.3bn of UK government bonds and concluded part of its extraordinary intervention to prevent a collapse in the pensions industry.

Just five days after the former chancellor unveiled his mini-budget on 23 September, the Bank took unprecedented action to purchase long-dated UK government bonds, known as gilts, that are effectively government IOUs.

Bonds are a principal way countries raise funds.

Due to a lack of market confidence in the UK economy the interest rate on these bonds had reached highs not seen since the financial crash of 2008.

The result was government borrowing was more expensive and holding on to bonds became more expensive.

As a result pension funds sold large numbers of the bonds. In an effort to prevent a mass sell-off and a collapse in the pensions market, the Bank announced it was intervening to buy up 20 and 30-year gilts to steady the market.

That intervention was only to last 13 days, the Bank said. A total of £65bn could have been spent – £5bn a day.

Bank of England to stop government bond-buying scheme today

‘Don’t prolong the pain’: IMF criticises UK government for ‘undermining’ Bank of England

Government borrowing costs hit 20-year high after Bank of England confirms bond-buying will end on Friday

Earlier this week the interest rate payments on the gilts began to rise again as fears rose of the approaching 13-day cliff edge.

Read more:
Markets react negatively to Truss speech
Kwasi Kwarteng’s rise and fall, from Eton scholar to chancellor

Another statement came from the Bank on Monday that it was to purchase a new kind of gilt – index-linked gilts that have interest rates linked to inflation. Additional supports were announced for lenders who lend money to pension funds involved in a part of the pensions industry that was described by the Bank as experiencing “dysfunction”.

Of the £19.3bn spent, £7bn went on index-linked gilts, and £12.1bn went on conventional long-dated gilts.

Gilt interest payments began lowering following reports on Thursday that a government U-turn on the mini-budget was in the offing.

Related posts:

Whitbread in firing line over pandemic bonus deferrals Walmart-backed robotics group Symbotic in $4.5bn SoftBank SPAC merger Music streaming market faces investigation by UK competition regulator Metro Bank focuses on standalone future as takeover talks fall through Investors put FTSE pay chiefs on notice over post-pandemic rewards Shapps insists promises ‘being fulfilled’ despite downgrades to HS2 and northern rail plans Barclays reveals big annual profits and £19m Staley share award freeze Co-operative Bank hires bankers to spearhead renewed bid for consolidation IMF says Sunak should consider raising wealth taxes as inflation indicators ‘flash red’ Shrinkflation at Cadbury as size of Dairy Milk sharing bar is reduced but price stays the same Chancellor Nadhim Zahawi says ‘nothing off the table’ on tax cuts and calls for caution on public sector pay rises Currys says rising costs being passed on to shoppers and warns of impact on sales