On the 12th, the UK bond market was hit by violent volatility. Longer-term UK bonds started in negative territory and widened the decline in the afternoon. 30-year bond yields rose above 5% at one point. Traders sold their bond holdings after a Bank of England spokesperson confirmed the end of the bond purchase program as expected.
But hours later, the Bank of England launched its largest round of emergency bond buying since its intervention began last month. It bought all the conventional bonds offered by investors and the purchase amount reached £ 4.56 billion (about 740 billion yen). The 30-year bond largely offset the temporary decline and the yield closed at 4.8%, almost unchanged from the previous day.
“Anything can happen in the chaos of British politics,” said Kit Jacks, Société Générale’s chief FX strategist.
The turmoil of the day highlights how unpredictable and chaotic the UK bond market has become since the government’s announcement of a massive tax cut. Margin calls from pension funds have also fueled chaotic trading in UK bonds, particularly longer-term inflation-linked bonds.
In the foreign exchange market, the pound has rebounded after falling for five consecutive days against the dollar and is hovering around $ 1.11 per pound. The FTSE 100 Index fell 0.9%.
Bank of England Governor Bailey under pressure to withdraw 14-day end-of-year bond purchase program
Source: Bloomberg
news-rsf-original-reference paywall">Original title:UK bonds make a dramatic return as BOE earns £ 4.6bn(extract)
