Bank of England announces further bond intervention

Oct. 10 (UPI) -- Amid fledgling economic conditions, the Bank of England announced additional economic measures on Monday related to its intervention into the bond market.

The bank's Financial Stability Committee announced a "temporary and targeted intervention" on Sept. 28. That intervention is meant to restore confidence in the markets and is scheduled to end Oct. 14.

Monday's announcement amends those terms, "against the backdrop of an unprecedented repricing in U.K. assets," the bank said in a statement.

The bank will now increase the size of its daily auctions to ensure there is sufficient capacity for gilt purchases ahead of Friday's deadline.

"The Bank has carried out 8 daily auctions, offering to buy up to U.S. $44.295 billion, and has made around $5.5 billion of bond purchases. The Bank is prepared to deploy this unused capacity to increase the maximum size of the remaining five auctions above the current level of up to $5.5 billion in each auction. The maximum auction size will be confirmed each morning at 9 a.m. and will be set at up to $11 billion in today's operation. The Bank's existing reserve pricing mechanism will remain in operation during this period," the bank said in a statement.

Gilts are the equivalent of U.S. Treasury securities and informally refer to any bond with a low risk and low rate of return.

It will also launch a Temporary Expanded Collateral Repo Facility to ease liquidity pressures facing liability-driven investment funds. That liquidity insurance will now run beyond Oct. 14.

The bank will begin supporting further easing of liquidity pressures facing the LDI funds, providing banks with additional liquidity against Sterling Monetary Framework eligible collateral.

"In the final week of operations, the Bank is announcing additional measures to support an orderly end of its purchase scheme. Beyond the end of this week's operations, the Bank will continue to work with the U.K. authorities and regulators to ensure that the LDI industry operates on a more resilient basis in the future," the bank said in a statement.

Much like the United States, Britain continues to deal with high inflation, causing markets to decline heavily. The U.K. FTSE 100 exchange hit its lowest point in a year in late September and remains below 7,000 points, an important threshold.

British inflation has been as high as 13% this year on an annual basis and is behind a cost-of-living crisis in the country that's heavily affected some Britons this year and pressured leaders to find a solution. Some analysts say Britain could enter a recession before the end of the year.