London Daily

Focus on the big picture.
Thursday, Sep 18, 2025

Bank of England will buy UK government bonds in bid to calm markets

Bank of England will buy UK government bonds in bid to calm markets

Major intervention from the UK’s central bank comes hard on the heels of controversial ‘mini-budget’ that pitched debt-funded tax cuts.

The Bank of England will buy up U.K. government bonds to try to halt a dramatic sell-off as it warned of a "material risk to UK financial stability" in the wake of the government's mini-budget.

In a dramatic emergency intervention, the central bank said it would today start buying long-dated government bonds at “whatever scale is necessary” in a bid to “restore orderly market conditions.”

“The Bank is monitoring developments in financial markets very closely in light of the significant repricing of UK and global financial assets,” it said in a statement.

“This repricing has become more significant in the past day — and it is particularly affecting long-dated UK government debt. Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability.”

The move comes after the cost of U.K. government borrowing spiked dramatically and surpassed rates paid by Italy and Greece.

U.K. Chancellor Kwasi Kwarteng’s plan for debt-funded tax cuts — unveiled without the usual scrutiny from independent fiscal watchdog the Office for Budget Responsibility — has also led to a plunge in the pound and sparked criticism from the International Monetary Fund.

The bank’s move dramatically brought down the yields on government bonds. The yield on the 30-year benchmark gilt dropped around 1 percent from above 5 percent to 3.9 percent. The pound however fell more than 1 percent against the dollar before recovering to $1.074.

The BoE described the purchases of the U.K. government debt, known as gilts, as “temporary and targeted” but said they would take place at an “urgent pace” until October 14.

The Bank also decided to delay sales of its own portfolio of gilts built up under its quantitative easing program since the 2008 financial crisis. The sales were due to start next week but will now be postponed until October 31.

The Treasury said in a statement that the Bank of England was responding to “a risk from recent dysfunction in gilt markets.”

“These purchases will be strictly time limited, and completed in the next two weeks. To enable the Bank to conduct this financial stability intervention, this operation has been fully indemnified by HM Treasury,” it said.


‘Her fate is sealed’


Amid turmoil in the markets, Conservative MPs privately expressed anger at the plan unveiled by Kwarteng last Friday, which comes on top of a multibillion pound program of state subsidies to cap soaring energy costs for businesses and consumers. The opposition Labour Party demanded the recall of parliament.

As the Tories prepared to gather for their annual conference in the coming days, one Conservative MP said of new Prime Minister Liz Truss that the "least bad option at this point would be to fire Kwasi.”

And they added: "Her fate is sealed. But this is her best hope of avoiding total catastrophe.”

Labour seized on the BoE’s intervention, with leader Keir Starmer urging an end to the parliamentary recess and Shadow Chancellor Rachel Reeves saying: “The chancellor must make an urgent statement on how he is going to fix the crisis that he has made.”

Analysts meanwhile pored over the detail of the bank’s intervention. Capital Economics said that the BoE’s steps show “it is going to do all it can to prevent a financial crisis” but that U.K. markets are “in a perilous position.”

“It wouldn’t be a huge surprise if another problem in the financial markets popped up before long,” the research consultancy said in a note.

“Either way, the downside risks to economic growth are growing. And the chancellor’s 2.5 percent real GDP growth target is looking even more unachievable.”

Markets now anxiously await more detail on the size of the BoE’s intervention, said ING rates strategist Antoine Bouvet.

“We think purchases should and will last longer than the initial two weeks. This would restore market confidence and provide cover for investors to return to the market, sowing the seeds for the end of this crisis,” he said.

“Nevertheless, a lot still hinges on the Treasury and investors will be looking for a credible plan to get debt under control. Today's decision from the BoE only buys time.”


IMF warning


Kwarteng has promised more detail on his fiscal plan in the coming weeks, including independent costings from the OBR and a host of supply-side reforms.

In a scathing verdict on the U.K.’s plans issued Tuesday night, the IMF urged him to "re-evaluate" the tax-cutting plan, which includes the scrapping of the top rate of income tax and an end to a bonus cap for bankers, saying it will "likely increase inequality.”

"Given elevated inflation pressures in many countries, including the U.K., we do not recommend large and untargeted fiscal packages at this juncture," the statement said.

The IMF urged the government to "provide support that is more targeted and re-evaluate the tax measures" during the chancellor’s upcoming announcement.

Shortly after the IMF statement, credit ratings agency Moody's released its own damning verdict, saying the fiscal plan could threaten the country's credibility with lenders by creating larger budget deficits.

As allies of Truss — who won the Tory leadership on a tax-cutting, deregulatory agenda — hit back at the IMF, former Tory Chancellor George Osborne noted: “Odd to see free marketeers urging a free market government to ignore the markets.”

Newsletter

Related Articles

0:00
0:00
Close
Massive Strikes in France Pressure Macron and New PM on Austerity Proposals
Trump Seeks Supreme Court Permission to Remove Fed Governor Lisa Cook
Hillary Clinton’s Reckless Rhetoric Fuels Division After Charlie Kirk’s Assassination
NASDAQ Rises to Record as Intel Soars More Than 20%, Nvidia Gains 3%
Nvidia’s $5 Billion Bet on Intel Reshapes AI Hardware Landscape
Trump and Starmer Clash Over UK Recognition of Palestinian State Amid State Visit
Trump’s Quip on Biden and Google Lawsuit Revives Debate Over Antitrust Legacy
Macron and his wife to provide 'scientific photographic evidence' that she is a real woman
US Tech Giants Pledge Billions to UK AI Infrastructure Following Starmer's Call
Saudi Arabia cracks down on music ‘lounges’ after conservative backlash
DeepMind and OpenAI Achieve Gold at ‘Coding Olympics’ in AI Milestone
SEC Allows Public Companies to Block Investors from Class-Action Lawsuits
Saudi Arabia Signs ‘Strategic Mutual Defence’ Pact with Pakistan, Marking First Arab State to Gain Indirect Access to Nuclear Strike Capabilities in the Region
Federal Reserve Cuts Rates by Quarter Point and Signals More to Come
Effective and Impressive Generation Z Protest: Images from the Riots in Nepal
European manufacturers against ban on polluting cars: "The industry may collapse"
Sam Altman sells the 'Wedding Estate' in Hawaii for 49 million dollars
Trump: Cancel quarterly company reports and settle for reporting once every six months
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
US Launches New Pilot Program to Accelerate eVTOL Air Taxi Deployment
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
Hong Kong Industry Group Calls for HK$20 Billion Support Fund to Ease Property Market Stress
Joe Biden’s Post-Presidency Speaking Fees Face Weak Demand amid Corporate Reluctance
Charlie Kirk's murder will break the left's hateful cancel tactics
Kash Patel erupts at ‘buffoon’ Sen. Adam Schiff over Russiagate: ‘You are the biggest fraud’
Homeland Security says Emmy speech ‘fanning the flames of hatred’ after Einbinder’s ‘F— ICE’ remark
Charlie Kirk’s Alleged Assassin Tyler Robinson Faces Death Penalty as Charges Formally Announced
Actor, director, environmentalist Robert Redford dies at 89
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
JD Vance Says There Is “No Unity” with Those Who Celebrate Charlie Kirk’s Killing, and he is right!
Trump sues the 'New York Times' for an astronomical sum of 15 billion dollars
Florida Hospital Welcomes Its Largest-Ever Baby: Annan, Nearly Fourteen Pounds at Birth
U.S. and Britain Poised to Finalize Over $10 Billion in High-Tech, Nuclear and Defense Deals During Trump State Visit
China Finds Nvidia Violated Antitrust Laws in Mellanox Deal, Deepens Trade Tensions with US
US Air Force Begins Modifications on Qatar-Donated Jet Amid Plans to Use It as Air Force One
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
Elon Musk Retakes Lead as World’s Richest After Brief Ellison Surge
U.S. and China Agree on Framework to Shift TikTok to American Ownership
London Daily Podcast: London Massive Pro Democracy Rally, Musk Support, UK Economic Data and Premier League Results Mark Eventful Weekend
This Week in AI: Meta’s Superintelligence Push, xAI’s Ten Billion-Dollar Raise, Genesis AI’s Robotics Ambitions, Microsoft Restructuring, Amazon’s Million-Robot Milestone, and Google’s AlphaGenome Update
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Musk calls for new UK government at huge pro-democracy rally in London, but Britons have been brainwashed to obey instead of fighting for their human rights
Elon Musk responds to post calling for the murder of Erika Kirk, widow of Charlie Kirk: 'Either we fight back or they will kill us'
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
USA: Office Depot Employees Refused to Print Poster in Memory of Charlie Kirk – and Were Fired
Proposed U.S. Bill Would Allow Civil Suits Against Judges Who Release Repeat Violent Offenders
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
×