Bank of England releases statement as temporary gilt market operations cease

by | Oct 17, 2022

This morning, the Bank of England has made the following announcement (see below) saying that its’ interventions over the past few weeks in support of LDI funds have “enabled a significant increase in the resilience of the sector.”

In line with its financial stability objective, the Bank of England has carried out temporary and targeted purchases of long-dated UK government bonds since 28 September. The Bank increased the maximum size of its daily auctions from £5bn to £10bn on 10 October. Index-linked government bonds were included within the temporary purchase scheme on 11 October.

At the outset of the intervention, the Bank said that it would carry out temporary purchases on whatever scale was necessary to restore orderly market conditions. The purpose of the operations was to provide time for LDI funds to address risks to their resilience from volatility in the gilt market, not to provide a permanent backstop.

As previously announced, the Bank terminated these operations and ceased all bond purchases on Friday 14 October. As intended, these operations have enabled a significant increase in the resilience of the sector.

The Temporary Expanded Collateral Repo Facility (TECRF), announced on 10 October, will remain available until its planned closing date of 10 November 2022. Banks also have access to liquidity from the existing Indexed Long Term Repo facility (a weekly 6 month repo against a very wide range of collateral); the Discount Window Facility (DWF); and a weekly US Dollar repo supported by international swap lines. In addition, the Bank makes available reserves via its Short Term Repo facility each week, designed to ensure short term market rates remain close to Bank Rate.

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