Bank of England to purchase government bonds

In a statement released by the UK’s central bank, it said it has been monitoring developments in the financial markets “very closely” in the past couple of days in light of the significant repricing of the UK and global financial assets. This has become more significant in the past day and is particularly affecting long-dated UK government debt. 

It added, were “dysfunction” in this market to “continue or worsen”, there would be a material risk to UK financial stability. This, in turn, would lead to an unwarranted tightening of the financing conditions and a reduction of the flow of credit to the real economy. 

The move to purchase the government bonds is designed to “restore market functioning and reduce any risks of contagion to credit conditions” for UK households and businesses, and restore orderly market conditions. 

These purchases are strictly time-limited with the auctions taking place from today (28 September) until 14 October. 

To enable the bank to conduct this financial stability intervention, the operation will be fully indemnified by the treasury, with the government continuing to work closely with the bank to support its financial stability and inflation objectives.