BoE: Gilt purchases a temporary programme, will be unwound smoothly

The Bank of England (BoE) said on Wednesday that it was closely monitoring the liability-driven investment (LDI) funds ahead of the end of the emergency bond-purchasing programme on Friday, as reported by Reuters. The BoE further reiterated that gilt purchases are a temporary programme and that they will be unwound in a smooth and orderly fashion.

Additional takeaways

"Not reasonable to expect funds to insure against all outcomes, but working on tougher regulation."

"Global financial markets affected by spillover from dysfunction in UK long-dated gilt market."

"Will be challenging for some households to manage the rising cost of essentials and higher interest rates."

"If interest rates rise as markets expect, the share of households with high mortgage debt servicing levels to reach pre-financial crisis peak in late 2023."

"UK is vulnerable to loss of foreign investor appetite for UK assets, risks may be heightened currently."

"UK banks have the capacity to weather severe economic outcomes."

Market reaction

GBP/USD continues to fluctuate in a wide range as investors assess the impact of the BoE's announcements on financial markets. As of writing, the pair was up 0.8% on the day at 1.1060.