Focus on UK government bonds and sterling after the Bank of England announcement.
The BoE announced today that it will suspend the start of the liquidation of UK government bonds it had planned for next week by buying long-term Gilts on a temporary basis, in order to counter the market chaos:
chaos that was caused by Liz Truss’s government decision to launch a maxi tax-cut bazooka
to taxes that economists and strategists do not consider sustainable.
A few hours ago the Bank of England intervened as follows: in particular, the Financial Policy Commission of the central bank of the United Kingdom admitted that the dysfunction that is affecting the gilt market, or of UK government bonds, represents a significant risk for the financial stability of the country.
The BOE effect was quickly priced by the gilts, with 10- and 30-year yields immediately slipping more than 30 basis points after the announcement. 30-year gilt rates then capitulated down to -63 basis points to 4.35%, while ten-year rates, a Bloomberg article reports, fell 43 basis points to 4.07%.
However, the pound remains under severe pressure, falling 1.50% against the US dollar to $ 1.0568 after collapsing to an all-time low of $ 1.0327 earlier in the week.