The Bank of England prepared to increase daily gilt purchases in the final week of the £65bn scheme

The Bank of England is poised to increase the size of its daily UK government bond purchases to “ensure there is sufficient capacity for gilt purchases” ahead of the end of the £65bn scheme on Friday.

The BoE intervened in the gilt market last month after pension funds and the wealth management industry asked to help stabilize the market after UK Chancellor Kwasi Kwarteng’s financial report sent shockwaves through markets.

It has since conducted eight daily auctions, offering to buy up to £40bn worth of gilts, and has only made £5bn in bond purchases.

In a statement on Monday, the BoE said it was “ready to use this idle capacity to increase the maximum size of the remaining five auctions above current levels of up to £5 billion in each auction”.

“Maximum auction size will be confirmed at 9am each morning and set at up to £10bn in today’s operations,” the BoE added.

The BoE justified its intervention by “restoring the functioning of the long-dated government bond market and reducing the risk of credit contagion for UK households and businesses”.

The central bank also unveiled a temporarily expanded collateral repo facility that would allow banks to ease the liquidity pressures their client LDI funds face through liquidity insurance operations. The plant runs beyond the end of this week.

https://www.ft.com/content/c7ed9668-e316-4672-99fb-2bffa841b7e8 The Bank of England prepared to increase daily gilt purchases in the final week of the £65bn scheme

Adam Bradshaw

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