Bank of England says market repricing has become more significant on recent days; bank will carry out temporary purchases of longer-dated UK govt bonds from 28th Sept to restore orderly market conditions; purchases to be time limited

GILTS

• 
  The Bank will carry out temporary purchases of long-dated UK government bonds from 28 September until 14th October. The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome.


• Thereafter, the first gilt sale operations will take place on 31 October.
  


• The MPC’s annual target of an GBP 80bln stock reduction is unaffected and unchanged. 

POLICY 

• Stands ready to restore market functioning and reduce and risks from contagion to credit conditions for UK households and businesses.


• The MPC will not hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term, in line with its remit.

Via BoE

Reaction details (11:10)

• In wake of this pronounced upside occurred in Gilt Dec'22 lifting from 91.50 to 95.50 before paring this 400 tick move higher and settling around the 93.60 mark, with upside of circa. 50 ticks on the session. The contract later rose to 96.00 around 20 minutes after the release. 


• 
  GBP/USD initially spiked higher from 1.0676 to 1.0840 before puling back to 1.0618 over the course of three minutes.


• 
  FTSE 100 Dec future rose from 6847.5 to 6903.0 over the course of two minutes before extending gains to 6919.0

Analysis details (11:09)

• In light of current market conditions, the Bank’s Executive has postponed the beginning of gilt sale operations that were due to commence next week.

28 Sep 2022 - 11:01- Fixed IncomeImportant- Source: Newswires