https:// www. smh .com. au/world/europe/dysfunction-in-this-market-bank-of-england-intervenes-over-material-risk-to-uk-economy-20220928-p5blsz.htmlLondon:The Bank of England has taken a dramatic step to calm a crisis in government bond markets, suspending its program to sell bonds and instead committing to buy them to counter “dysfunctional markets”.
The central bank has been forced to make the emergency intervention as it warned of “material risk” to UK stability amid turmoil that has sent government borrowing costs soaring.
The value of the pound has collapsed to record lows against the US dollar and British bonds have plunged since Friday, when UK Chancellor Kwasi Kwarteng unveiled his “mini” Budgetinvolving £45 billion ($75 billion) of debt-financed tax cuts. The cost of government borrowing has surged and households are now braced for big increases in mortgage payments.
In a statement on Wednesday morning London time, the bank said it would carry out temporary purchases of long-dated UK government bonds immediately. “Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability,” it said. “The purchases will be carried out on whatever scale is necessary to effect this outcome,” it added, saying the Treasury would underwrite any losses.
warm up the printing presses!
