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BoE signals to lenders it is prepared to extend bond purchases - FT

12 October 2022 09:19 (UTC +04:00)

The Bank of England has signalled privately to lenders that it was prepared to extend its emergency bond-buying programme beyond this Friday's deadline if market conditions demanded it, the Financial Times reported on Wednesday, citing three sources, APA reports citing Reuters.

The report comes after the British central bank's governor Andrew Bailey said on Tuesday that he had no intention of extending purchases of bonds beyond Friday when they are due to stop.

Sterling bounced 0.4% to $1.1008 after the report.FRX

By buying bonds, the BoE is seeking to reverse what it sees as "dysfunction" in the bond market. Specifically, the central bank was seeking to address problems facing pension funds.

These funds were forced to stump up vast amounts of emergency collateral in liability-driven investments (LDI), which use derivatives to hedge against shortfalls in pension pots, after British government bonds dropped sharply in value.