London Daily

Focus on the big picture.
Tuesday, Jun 16, 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
Government Approves Fast-Tracked Broadcast Merger Reshaping UK's Media Landscape
Resignation of Defence Secretary John Healey Triggers Debate Over UK Military Strategy
Britain Intensifies Diplomatic Efforts to Support US-Iran Ceasefire
Bank of England Faces Tough Interest Rate Choices After Economic Contraction
Belfast Sees Second Day of Anti-Migrant Riots as Police Deploy Water Cannons
UK Economy Shrinks in April as Energy Price Shocks Weigh on Growth
UK to Ban Social Media Access for Children Under 16 From 2027
UK Parliament Opens Week of Fast-Tracked Security and Infrastructure Legislation
Northern Ireland Projects £21 Million Boost From Major Cultural and Sporting Events
UK and Japan Sign Technology Security Pact to Strengthen AI and Supply Chain Cooperation
UK Welcomes US-Iran Peace Breakthrough Aimed at Restoring Strait of Hormuz Shipping
British Forces Intercept Russian Shadow Fleet Oil Tanker in English Channel Sanctions Operation
UK to Ban Social Media for Under-16s Under Landmark Online Safety Expansion
Anti-Immigrant Riots Spread Across Belfast, Raising Security Concerns
Ministry of Defence Opens Europe's Largest Drone Testing Facility in Swindon
Kemi Badenoch Calls for Deregulation to Restore City's Global Competitiveness
UK Housing Market Posts Sharpest June Price Decline in Fourteen Years
NHS Waiting Lists Rise to 7.22 Million as Diagnostic Delays Reach New Highs
Makerfield By-Election Raises Prospect of Labour Leadership Challenge
Bank of England Expected to Hold Interest Rates at 3.75% Despite Growing Policy Divisions
Royal Marines Seize Sanctioned Russian Oil Tanker in English Channel
Prime Minister Keir Starmer Set to Ban Social Media and AI Chatbots for Under-16s
United Kingdom Markets Rally After US-Iran Deal Reopens Strait of Hormuz
Defence Secretary John Healey Resigns Over Military Spending Dispute, Triggering Cabinet Crisis
Royal Navy Takes Part in Trooping the Colour for the First Time in 350 Years
Think Tank Warns Labour's European Union Reset Could Carry Significant Economic Costs
UK Semiconductor Centre and Japan's Rapidus Forge Advanced Chip Manufacturing Partnership
UK and Japan Launch Offshore Wind Compact Backed by £9 Billion in Investment
Starmer and Trump Discuss Iran Peace Efforts and Reopening of the Strait of Hormuz
United Kingdom and Japan Sign £18 Billion Investment Partnership Focused on Clean Energy and Advanced Technology
Barclays Moves to Acquire GoHenry in Bid to Expand Youth-Focused Fintech Services
UK Lupus Patients Show Remission in NHS Genetic Therapy Trial
London Clean Air Zones Linked to Fewer Emergency Hospital Admissions for Respiratory Illness
UK World Cup Scheduling Research Suggests Energy Bill Savings From Off-Peak Usage
UK Economic Anxiety Rises Among Young People Over Long-Term Job Prospects
NHS Expands Meningitis B Vaccination Programme for School Leavers and New Students
London Ultra-Low Emission Zone Linked to Drop in Emergency Respiratory Hospital Admissions
Derbyshire Police Officer Investigated Over Alleged Use of AI-Generated Evidence in Case Files
UK Parents Back Proposed Under-16 Social Media Ban as Online Safety Concerns Grow
Four Palestine Action Activists Jailed Over Sabotage Attack on Israeli-Linked Arms Facility
Barclays to Acquire GoHenry in Push to Expand Digital Banking for Children and Teenagers
UK Government Reaffirms Defence Spending Commitment Amid Cabinet Pressure and Political Disputes
Belfast Unrest Prompts Security Review as Paramilitary Activity Comes Under Renewed Scrutiny
SpaceX IPO Pushes Elon Musk to Become World’s First Trillionaire After Record Valuation Surge
United States and Iran Near Landmark Peace Framework as Negotiations Reach Final Stages
UK Competition Watchdog Investigates Ryanair Family Seating Charges
Imperial College Study Links London Emissions Charges to Lower Hospital Admissions
Scottish First Minister Launches US Trade Initiative Ahead of World Cup Match in Boston
Fifteen Million Workers Gain Expanded Sick Pay Rights Under UK Reforms
British Retail Investors Secure Record Participation in SpaceX Share Offering
×