Its move came as Chancellor Kwasi Kwarteng officially brought forward the date of his next major fiscal statement.to pay down the debts that are funding his £45 billion tax cuts and £60 billion-plus energy subsidies.
The government’s announcements do not appear to be having much of a soothing effect: the 10-year government bond yield has climbed back towards the 4.5 per cent peak it reached after Dr Kwarteng announced his debt-fuelled fiscal spree on September 23. The BoE said it would spend as much as £65 billion until October 14 to purchase long-dated gilts, providing a counter-party buyer to the sell-off by pension funds’ liability-driven investment managers.The bond market rapidly stabilised, to the extent that the Bank did not even have to spend anything like the £5 billion it was prepared to inject each day.
The BoE also announced a “temporary expanded collateral repo facility”, which will allow LDIs to use a wider range of collateral to meet banks’ margin calls, including corporate bonds.And it will extend its long-term repo operations on Tuesdays, so that these will give banks more liquidity to lend to LDIs using gilts as collateral.
The OBR will run the ruler over his October 31 statement, where he is expected to set out supply-side reforms and spending cuts that will prevent Britain’s debt-to-GDP ratio from spiralling much beyond the current level of 100 per cent.But MPs from Dr Kwarteng’s Conservative Party continue to fret that the spending cuts will land badly with a public worried about the soaring cost of living.