The British central bank then launched an emergency plan to purchase British government bonds the yield jump recorded in the last few days. Interest rates on the 30-year notes had reached their highest level since 1998. The Bank of England spoke of risks to the country’s financial stability and has guaranteed unlimited purchases of long-term bonds with daily tranches up to to £5bn (€5.5bn). The institute has also postponed the start of the sales program for securities purchased in the past, which should start next Monday. The 30-year Gilt auction planned for this morning (British government bonds, editor’s note) has also been postponed to October 31st. After the announcement UK 10-year bond yields fell 39 basis points (0.39%) to 4.11%. The pound appreciated sharply against both the dollar and the euro.
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Getting the Boe to act would have been beyond anyone’s fears looming potential crisis in the financial system. In particular, due to the lenders’ requirement for additional guarantees on the loans obtained through the collateralization of UK government bonds. condition they would bring about many large bondholders resell them in the market by burying the price. The trigger for the fall in bond and pound value was the plan for tax cuts 45 billion poundsmainly in favor of higher incomes, presented by the government of the new prime minister Liz Truss. The measure is completely uncovered, for the loans only a recourse to debts is provided.
The maneuver was also criticized yesterday by the IMF. “The nature of the measures is likely to increase inequalities,” says the Washington Institute, pointing the finger at “untargeted” initiatives that are discouraged given high inflation. “It is important that fiscal policy does not conflict with monetary policy,” stresses the IMF. “We’re concentrating on that Growth of the economy to raise living standards for allA spokesman for the UK Treasury said today, adding: “We have acted quickly to protect homes and businesses this winter and next in the wake of unprecedented energy price increases.”
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