London Daily

Focus on the big picture.
Wednesday, Aug 12, 2026

Pound suffers as Bank of England governor rules out extension to bond-buying aid for pension funds

Pound suffers as Bank of England governor rules out extension to bond-buying aid for pension funds

The Bank expanded its intervention to help pension funds again on Tuesday by buying up index-linked gilts, a day after increasing the daily amount it can spend on long-dated gilts.

The Bank of England's governor has ruled out extending its bond-buying support for pension funds beyond Friday's deadline, prompting a dramatic fall in the value of the pound.

Andrew Bailey told an event in Washington that funds had "three days left... to get this done" after a series of interventions to support the "dysfunctional" market in the wake of the wider meltdown over the government's mini-budget.

The latest action, on Tuesday, saw the Bank snap up index-linked gilts, government bonds with interest payments in line with inflation.

They are heavily used by pension funds.

The Bank had already been buying up long-dated gilts - a type of government bond that make up a large proportion of pension pots - to steady market jitters.

They saw yields - the rate demanded to hold government debt - shoot up as pension schemes tried to raise hundreds of billions through firesales of government and corporate bonds to meet cash calls - the latest coming from providers of so-called liability-driven investment strategies.

They are demanding funds put up more money to support new and older hedging positions.

Mr Bailey told an event organised by the Institute of International Finance that the intervention must be temporary.

"We have announced that we will be out by the end of this week. We think the rebalancing must be done.

"And my message to the funds involved and all the firms involved managing those funds: You've got three days left now. You've got to get this done."

Industry body the Pensions and Lifetime Savings Association had earlier urged the Bank to extend the bond-buying programme until 31 October - the new date for the publication of the government's debt plan - at least.

Mr Bailey's clear stance on the issue saw the pound, which had been trading higher on the day versus the dollar earlier, sink by more than one and a half cents to below $1.10.

On Monday the Bank announced a potential doubling of the amount it was willing to spend every day on long-dated gilts.

Gilt yields, the interest rate payable on government bonds, rose on Monday, near the 5% highs of 27 September, the day before the Bank made its first intervention.

They fell when news of the latest operation was announced but long-dated yields later rose higher again.

That took place when the Bank revealed it had bought £1.947bn of index-linked bonds on Tuesday, adding that it had rejected £466.9m of offers to sell to the central bank.

It also bought up £1.363bn in long-dated bonds - also well below the £5bn possible.

The yield on 30-year bonds rose back to 4.8% for a short time, having been down at 4.4% around lunchtime.

The benchmark 10-year yield remained around the 4.4% level.


"Things seemed calmer again today," Mr Bailey told the event.

"We will see," he added.

The Bank announced on 28 September a temporary and emergency buying programme of long-dated gilts that are to be repaid in 20 to 30 years time, in the wake of chancellor Kwasi Kwarteng's mini-budget announcement.

Bond buying period due to end on Friday


Market turmoil that stemmed from the mini-budget led to the unprecedented intervention from the regulator to prevent part of the pension market collapsing as the cost of interest on gilts surged.


Russ Mould, investment director at AJ Bell, said of the scheme's expansion before Mr Bailey's remarks: "The Bank of England hopes to avoid a crisis in the market by being a willing buyer of bonds from pension funds who are under pressure.

"These pension funds will welcome today's move, but whether the broader market shares the same enthusiasm remains to be seen.

"The key sticking point is that the support measures are only scheduled to last until Friday.

"Will that be long enough, or will the Bank of England extend the support scheme? Extending it could go one of two ways - the market either applauds the move and breathes a sigh of relief or it gets even more worried, thinking that the extra time suggests the crisis is more severe than originally thought."

Newsletter

Related Articles

0:00
0:00
Close
China’s Kimi Launches AI-Focused Credit Card With Agricultural Bank of China and American Express
Former Labour Adviser Arrested on Suspicion of Spying for China Held Privileged Access as Top Party Donor
Turkish Parliament Passes Landmark Bill Granting Conditional Amnesty to Disarmed PKK Members
Donald Trump Warns FIFA Against Ousting Gianni Infantino Amid Revolt by Global Football Leaders
Jeff Bezos Joins Investor Group Closing In on $6 Billion Liverpool FC Stake
Police Conduct Cross-Border Raids Against Northern England Drug Network
Nicola Sturgeon Protested at Edinburgh Festival Fringe Event
Major UK Retail Chain Enters Administration With One Hundred Fifty-Four Stores Set to Close
Heathrow Renews Call for Runway Expansion After Losing Europe’s Busiest Airport Ranking
Government Condemns One Million Pound Thames Water Executive Bonus Amid Drought
NHS England Says More Than One Hundred Thousand Hepatitis C Patients Have Been Cured
UK Foreign Secretary Ed Miliband Calls for End to West Bank Settler Violence
UK Prepares for Deepest Partial Solar Eclipse Since Nineteen Ninety-Nine
UK Heatwave Triggers Amber Health Alerts as Economic Losses Reach Four Point Four Billion Pounds
UK Offers Electricity Bill Discounts to Communities Hosting New Power Infrastructure
Bank of England Expected to Hold Interest Rates at Three Point Seven Five Percent
UK Government Moves to Ban Subscription Traps and Misleading Retail Discounts
Andy Burnham Gives Councils New Powers to Block Betting and Vape Shops
UK Councils to Receive Sweeping Planning Powers to Ban New Vape and Betting Shops
Nicola Sturgeon Says She Has No Contact With Estranged Husband After SNP Embezzlement Case
Police Arrest Two Men After Aberdeenshire Defense Technology Office Break-In
Greater Manchester Councils Gain Powers to Restrict New Vape and Betting Shops
Coroner Finds Treasury Workplace Failures Contributed to Personal Assistant’s Suicide
English and Welsh Courts Ban Meta Smart Glasses Over Recording and Privacy Risks
Strait of Hormuz Disruption Could Double UK Inflation and Trigger Recession, Forecasters Warn
UK Expands Global Talent Visa Scheme to Support Research-Intensive Companies
UK Equity Funds Suffer Record One Point Six Billion Pound Outflow Amid Capital Gains Tax Fears
Three-Quarters of England Enters Drought as Fifth Summer Heatwave Raises Economic Risks
UK Hiring Stabilizes for First Time Since 2022 as Employers Adjust to Higher Payroll Costs
UK Chancellor Orders Whitehall Spending Cuts as Public Debt Exceeds Three Trillion Pounds
UK Manufacturing Output Records Fourth Straight Month of Growth
UK Condemns Russian Torture of Ukrainian Prisoners and Recruitment of Foreign Nationals
Long-Lost Royal Navy Warship HMS Tiger Found in English Channel After 118 Years
Northern Ireland Finance Minister Seeks Urgent Treasury Talks Over Regional Budget Pressures
UK Government Targets Subscription Traps and Misleading Discounts in New Consumer Rules
Alleged Cartel Boss Daniel Kinahan Extradited From Dubai to Face Criminal Charges
AI Chatbots Challenge Traditional News Consumption and Raise Job Concerns
Andy Burnham Government Promises Crackdown on Exploitative Business Practices
UK University Funding Model Faces Growing Pressure From Unsustainable Student Debt
Government Urged to Subsidise Energy Bills for Vulnerable UK Households
UK Military Spending Plans Threaten to Deepen Infrastructure Funding Gap
Israeli Government Rejects US Peace Framework for Gaza
New Labour Government Signals Closer Economic and Strategic Ties With European Union
Amber Heat-Health Alerts Issued Across England as Temperatures Threaten 36 Degrees
UK Economy Expected to Grow Despite Energy and Supply Chain Shock From Iran Conflict
Foreign Social Media Accounts Drove Disinformation During Belfast and Southampton Riots
Record Number of Migrants Cross English Channel in Single Vessel as Smugglers Deploy Mega-Dinghies
Russia’s A7 Builds a State-Linked Payments Network Beyond Western Sanctions
Reports of Mark Zuckerberg-Linked Superyacht Declining Rescue Assistance Draw Maritime Scrutiny
Preserving Three Banksy Artworks in London Has Cost Taxpayers Nearly £150,000
×