[Epoch Times, September 28, 2022]On September 28, the Bank of England (Bank of England), in order to stabilize the market order, suddenly decided to enter the market to buy long-term British bonds, in order to drive down the soaring bond interest rates.
The bank pointed to the need to prevent “enormous risks to the UK’s financial stability”, to get the economy financed and ready to restore market order and prevent credit risks from spreading to households and businesses.
At the same time, the Bank of England said that the size of the bond purchases will be as the market needs, until the desired effect is achieved. The 10-year government bond yield fell to 4.1% from the 4.5% level this week. A week ago, the bond yield was only at 3.4%.
However, the British government on Friday rolled out 45 billion pounds of tax cuts to stimulate the economy, and will pay for it with 72 billion pounds of debt over the next year. The market reaction was that traders knew the government needed loans and pushed up construction costs, and the pound hit rock bottom. The International Monetary Fund (IMF) has warned Britain to avoid debt financing.
The Bank of England said on Monday that it would not go “against the revival measures”, leaving everything to be planned on November 3. Different from the authorities, the bank is trying to control double-digit inflation by suppressing inflation. Therefore, the market expects interest rates to rise by 0.1% in November.
The bond purchases are expected to last until Oct. 14, “and exit in an orderly manner, provided market risks are contained.” @
Responsible editor: Wu Hao#