The UK bond market was hit by violent volatility on the 12th. Longer-term British bonds started in negative territory and expanded the decline in the followingnoon. Yields on 30-year bonds rose above 5% at one point. Traders sold their bond holdings following a Bank of England spokesman confirmed the end of the bond-buying program as planned.
But hours later, the Bank of England launched its largest emergency bond-buying round since its intervention began last month. It bought all the conventional bonds offered by investors, and the purchase amount reached 4.56 billion pounds (regarding 740 billion yen). The 30-year bond largely canceled out the temporary decline, and the yield ended at 4.8%, almost unchanged from the previous day.
“Anything can happen in the chaos of British policymaking,” said Kit Jacks, chief FX strategist at Societe Generale.
The day’s turmoil highlights just how unpredictable and chaotic the UK bond market has become since the government’s announcement of a massive tax cut. Margin calls by pension funds have also fueled chaotic trading in British bonds, especially longer term, inflation-linked bonds.
In the foreign exchange market, the pound has rebounded following falling for five consecutive days once morest 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 Bond-Buying Program
Source: Bloomberg
news-rsf-original-reference paywall">Original title:UK Bonds Make a Dramatic Comeback as BOE Snaps Up £4.6 Billion(excerpt)
