BoE Intervene to Stabilise Markets

8:28am, September 29th 2022

Yesterday saw intervention from the Bank of England as gilt markets (UK government debt) began to seize up with a lack of buyers. This market dysfunction impacted UK pension funds which were forced to sell more gilts for cash requirements due to the price deterioration since the mini-budget last week. Had the Bank not intervened yesterday then we could have been in a position where pensions funds potentially did not have the necessary cash to meet collateral requirements.

The Bank of England announced in the morning that they would inject up to £65 billion into the gilt market to stabilise prices and allow orderly market conditions. They confirmed they would buy up to £5 billion of gilts each day for up to 13 days. This intervention was as important in its message as its function. The BoE is confirming through action that they are closely monitoring the situation and will do what is necessary to maintain as much stability as possible.

The pound initially rallied after the news but immediately sold off again, pushing towards recent lows against both the US dollar and euro. As US participants arrived at their desks, the pound began to find support and some new bids. It rose back to $1.09 against the greenback in late trade but has given some ground back in the Asian session. Watch this space…!

Written by Viv Savani. 8:28am, September 29th 2022 Share

The details expressed in this market report are for information purposes only and are not intended as a solicitation for funds or a recommendation to trade. Cornhill International Payments limited accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the above information. Cornhill International Payments Limited is a limited company registered in England and Wales. Registered number:6260585. Registered office: Hana, 70 St Mary Axe, London, EC3A 8BE. Cornhill International Payments Ltd is authorised by the Financial Conduct Authority for the provision of payment services under the Payment Services Regulations 2017 (Reference number: 504494) and supervised by the Financial Conduct Authority under the Money Laundering Regulations 2017.

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