Bank of England announces bond purchases to calm markets

LONDON, Sept. 28 (Xinhua) -- The Bank of England (BoE) on Wednesday announced temporary purchases of long-dated United Kingdom (UK) government bonds "on whatever scale is necessary" in an emergency action to restore orderly market conditions.

Auctions started on Wednesday and will take place on each weekday until Oct. 14. The UK central bank said in a statement that it stands ready to purchase conventional gilts with a residual maturity of more than 20 years in the secondary market, initially at a rate of up to 5 billion British pounds (5.4 billion U.S. dollars) per auction.

These parameters will be kept under review in light of prevailing market conditions, and the purchases will be unwound in a smooth and orderly fashion once risks to market functioning are judged to have subsided, it added.

In light of current market conditions, the BoE said it has also postponed gilt sale operations that were due to commence next week.

After the UK government on Friday unveiled the largest tax cut package since 1972, it has thrown financial markets into turmoil as the British pound collapsed and the government borrowing costs rose sharply. Investors worried the policy would ramp up public borrowing, bring much fiscal uncertainty and push up already high inflation.

The repricing of UK and global financial assets has become more significant in the past day, and it is particularly affecting long-dated UK government debt, the BoE said on Wednesday.

"Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability," it added.

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