Pound stabilising after BoE moves to purchase govt bonds

According to Reuters, the pound jumped the most since mid-June on Wednesday, pulling the euro along.

Sterling was 0.51 per cent lower at $1.0831, returning some of the previous session’s 1.41 per cent rally.

The BoE announced it would keep purchasing government bonds until October 14 to achieve financial stability.

“The bank will carry out temporary purchases of long-dated UK government bonds from September 28,” the BoE said in a statement. “The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome. The operation will be fully indemnified by HM Treasury.”

The sale of government bonds caused the 30-year gilt yield to increase to more than 5 per cent for the first time in 20 years.

The bank’s executive had postponed gilt sale operations that were due to commence next week.

The UK government’s tax-cut plans last week, including remedial measures for households and the business sector amid increasing energy prices, led to widespread worry about the UK’s financial status.

Meanwhile, Chancellor of the Exchequer Kwasi Kwarteng came out in support of the BoE’s action.

His spokesperson said: “The government will continue to work closely with the bank in support of its financial stability and anti-inflation objectives.”