Bank of England widens daily bond purchase
Move aims to avoid ‘fire sale’ which poses material risk to UK financial stability, bank says
ANKARA
The Bank of England on Tuesday decided to widen its daily bond purchase operations to include index-linked gilts in a bid to avoid a "fire sale."
"Dysfunction in this market, and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to UK financial stability," the bank said in a statement.
The move starting from Tuesday will be effective for four days, besides the bank’s existing daily conventional gilt purchase auctions, the statement said.
"These additional operations will act as a further backstop to restore orderly market conditions by temporarily absorbing selling of index-linked gilts in excess of market intermediation capacity," it added.
The bank will spend up to £5 billion ($5.5 billion) per day on inflation-linked government debt bonds.
It intervened in the bond market for the second time in two days as borrowing costs surged due to a sharp sell-off in government bonds.
