Search for:
kralbetz.com1xbit güncelTipobet365Anadolu Casino GirişMariobet GirişSupertotobet mobil girişBetistbahis.comSahabetTarafbetMatadorbetbeylikdüzü korsan taksiBetturkey
Bank of England launches bond-buying programme to prevent ‘material risk’ to UK financial stability | Business News

The Bank of England has launched a temporary bond-buying programme as it takes emergency action to prevent “material risk” to UK financial stability.

It revealed that it would buy as many long-dated government bonds as needed between now and 14th October in a bid to stabilise financial markets in the wake of the mayhem that followed the government’s mini-budget last Friday.

In addition to the plunge in the value of the pound, it has also seen investors demand a greater rate of return for UK government bonds – essentially IOUs.

That is because the level of borrowing required to fund the government giveaway, including tax cuts and energy aid for households and businesses, shocked the market which immediately questioned the sustainability of the public finances.

Cost of living latest

The International Monetary Fund has since added its voice to criticism of the growth plan.

What the Bank’s action is aimed at doing is tackling consequences of rising bond yields, in this instance a liquidity crunch facing pension funds.

WHY THE BANK OF ENGLAND HAS ACTED

 Ian King

Ian King

Business presenter

@iankingsky

There are some very, very specific reasons why the Bank of England is intervening in this particular asset class in long-dated gilts – that’s gilts of a 20 to 30 year duration.

It affects traditional pension funds where a retiree is guaranteed a certain payout at their retirement based on their final salary when they retire.

Now, a lot of these funds use long-dated gilts as part of their investments and what has been happening over recent days is a lot of the investment funds have been asking pension funds to post more collateral – to put up cash.

It has been reported in The Times that actually these cash calls have been running into tens of billions of pounds since the beginning of the week because of this spike in long-dated gilt yields.

That is why the Bank of England is specifically targeting that with this gilt intervention.

It is aimed at seeing off a crisis that’s potentially starting to emerge in pension funds.

The Bank said in a statement: “Were dysfunction in this (long-dated bond) market to continue or worsen, there would be a material risk to UK financial stability.

“This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.”

The programme marked the Bank’s first policy intervention as it battles to bring down inflation and ease the cost of living crisis. Its chief economist signalled on Tuesday that a “significant” rise in Bank rate was also likely ahead.

The government’s growth plan is only seen as adding inflationary pressure to the economy, leaving it at loggerheads with the Bank’s mandate.

Please use Chrome browser for a more accessible video player

‘Crisis’ already for Truss government

The Bank said the bond purchases, which would be fully covered by the Treasury in the event of any losses, would be sold back once market conditions had stabilised.

The announcement certainly had an immediate effect on the market.

Data showed that 30-year bond yields fell back to 4.3%, having risen to levels above 5% not seen since 2022 earlier in the day. There were similar falls for 20-year yields.

Those for ten-year bonds also fell back below 4% from 4.6%.

Stock markets, which had endured widespread falls Europe-wide amid recession fears, erased some of their losses.

The FTSE 100 had ben almost 2% down but was just 0.8% lower on the day just before 1pm.

The pound, however, was a cent and a half down versus the dollar to stand at $1.0578 and a cent lower against the euro.

The single European currency was also suffering against a resurgent US currency.

In addition to its bond-buying action, the Bank said it would postpone the start of its efforts to unwind the sale of bonds it acquired through financial crisis and COVID crisis era quantitative easing.

The Bank had planned to reduce its £838bn of gilt holdings by £80bn over the next year.

Neil Wilson, chief markets analyst at Markets.com, said the Bank’s move followed evidence of “severe liquidity stress”.

This would have been particularly evident for pension funds who have faced demands for additional cash to cover off rising yields.

“The question is whether (this Bank action) acts to stabilise longer-term or if the market retests the Bank’s resolve”, he wrote.

“We’re now seeing the Bank go toe-to-toe with the market and this might not lead to any decrease in volatility”, he warned.

Government warned to reinstate eviction ban to prevent people from losing homes during cost of living crisis | UK News

The eviction ban must be reinstated in England to ensure no one loses their home during the cost of living crisis, a new report has warned.

The Kerslake Commission on Homelessness and Rough Sleeping warned that inaction could lead to a “catastrophic” homelessness crisis, with the government failing to meet its manifesto pledge to end rough sleeping.

Its new report calls on the government to temporarily bring back the eviction ban – mirroring what was announced in Scotland earlier this month.

The report calls for a pause in benefits deductions and for benefits to be increased immediately – not next April as planned.

It urges the government to take a “two-pronged” approach to get people off the streets and ensure vulnerable tenants do not end up on them.

The commission was set up to examine the lessons from the public health emergency response to rough sleeping during the pandemic. It is chaired by former head of the Civil Service Lord Bob Kerslake and comprises 36 experts from the health, housing and homelessness sectors.

Its latest report includes new recommendations on the cost-of-living crisis and says “the cost of not acting now is too great, as we stand on the precipice of a new emergency”.

Lord Kerslake said the government’s responses to the pandemic and the cost-of-living crisis “must be equally urgent”.

He added that failure to act could see this become a “homelessness as well as an economic crisis” and that the results could be “catastrophic”.

The National Residential Landlords Association said it was right to call for improvements to the benefits system, but that preventing failed tenancies from ending would be “catastrophic” and would not address people’s hardships.

Chief executive Ben Beadle said: “There is a very real danger that an eviction ban would give free rein to tenants committing antisocial behaviour and those deliberately not paying their rents, knowing they will face no consequences and the bill will be picked up by others.”

The government did not say whether it was considering a temporary ban.

A spokeswoman said: “We are giving councils £316 million this year to ensure families are not left without a roof over their heads.

“This is alongside the action we are taking to support families with the cost of living this winter through our £37 billion pound support package.

“This includes £1,200 this year for the most vulnerable, helping them to pay their bills and stay in their homes.”