London Daily

Focus on the big picture.
Sunday, Oct 04, 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
UK Introduces Stricter Subcontractor Checks and Expanded Trade Union Access
Green Party Proposes Three-Year Emergency Freeze on Private Rent Increases
UK Treasury Committee Seeks Tax Clarification Over Manchester City Investigation
Royal Marines Deploy to Faroe Islands for Northern European Security Exercise
UK Business Confidence Weakens as High Costs Delay Investment
UK GDP Growth Revised Up to 0.5% in Second Quarter
Bank of England Warns of Financial Stability Risks From Autonomous AI
UK Expands Early Prisoner Release Scheme to Ease Overcrowding
UK Records Worst Bluetongue Outbreak on Record Across Livestock Farms
UK Government Faces Shrinking Fiscal Headroom Ahead of October 28 Budget
UK 30-Year Gilt Yield Reaches 6% as Energy Shock Drives Borrowing Costs Higher
Church of England to Apologize for Role in Historical Forced Adoptions
UK Defence Ministry Investigates Historical Use of RAF Bases by Jeffrey Epstein
Scottish Housing Completions Fall to 11-Year Low
Welsh First Minister Calls for Expanded Devolution Settlement
UK Pledges £50 Million to Expand Domestic Military Drone Capabilities
UK Opens First Commercial Geothermal Plant in Cornwall
Green Party Wins Gorton and Denton By-Election as Labour Falls to Third
Prime Minister Andy Burnham Opens Review of UK-EU Relationship
UK Inflation Rises to 3.1%, Adding Pressure on Household Finances
UK Removes VAT From Domestic Electricity Bills to Ease Winter Energy Costs
Counterterrorism Police Arrest Sixth Suspect Over RAF Fairford Incident
UK Councils to Receive Sweeping Planning Powers to Ban New Vape and Betting Shops
Chancellor John Healey Faces Tax and Pension Scrutiny Ahead of Autumn Budget
Metropolitan Police Apologise for Accidental Disclosure in High-Profile Investigation
UK Universities Report Record International Enrolment as Housing Pressure Grows
UK Logistics Firms Monitor Rhine Disruption as Low Water Threatens European Supply Chains
UK Food Industry Warns Inflation Could Approach 7%
UK Introduces Vaping Duty and Mandatory Retail Stamps
Scotland Raises Property Taxes and Expands Child Payment in Annual Budget
Greggs Plans Four Factory Closures With 740 Jobs at Risk
OECD Raises UK 2026 Growth Forecast to 1.1%
UK Inflation Rises to 3.1% as Bank of England Faces Rate Debate
Andy Burnham Criticises Brexit and Says Rejoining EU Single Market Remains an Option
UK Imposes New Sanctions on Russian Military Networks and Propagandists
UK Launches Nationwide Early-Release Prison Scheme
Andy Burnham Says Security Services See Signs of Iranian Involvement in RAF Fairford Incident
Manchester City Found Guilty on Premier League Financial Charges After Independent Investigation
Scottish Court to Rule on Bid to Force No-Confidence Vote Against Aberdeen Council Co-Leader
UK Bans Extra Charges for Seating Children Under 12 Beside Accompanying Adults
UK Introduces Vaping Duty and New Licensing Requirements
Greggs to Close Four UK Factories and Cut 740 Jobs
Hundreds of Prisoners Released Early as England and Wales Prisons Reach 98% Capacity
UK Unveils New Russia Sanctions Targeting War Funding and Shadow Fleet
Burnham Says There Are Strong Indications of Iranian Involvement in RAF Fairford Security Breach
Prime Minister Andy Burnham Raises Prospect of Reviewing Britain's Post-Brexit EU Relationship
Markets Price in Bank of England Rate Increases as Inflation Rises to 3.1%
UK Borrowing Costs Climb Toward 5.5% as Global Bond Sell-Off Intensifies
UK-France One-In-One-Out Migration Agreement Expires as London Seeks Alternative Measures
Southwest England Faces Flood Alerts After Heavy Autumn Storms
×