As panic engulfs the UK financial market, the Bank of England is forced to extinguish it. The UK regulator has been pouring money into the economy to quell the havoc.
The BOE has notably extended its ongoing bond purchase program to include inflation-linked gilts. Over the course of several days in October, the UK central bank spent £5 billion on bond purchases, and it was not the first such massive intervention by the regulator. Earlier, Liz Truss’s controversial mini-budget plan sent the UK financial market into chaos. Instead of calming down market players, the prime minister triggered a hectic sell-off, forcing the Bank of England to extinguish the firestorm raging in UK markets.
The tax cuts announced by the British government sent UK government bond yields upwards, negatively affecting pension funds. Due to the liability hedging strategy employed by these funds, they were forced to sell bonds to raise cash. The turmoil in the market has put additional pressure on the already declining pound sterling.
