The Bank of England has drawn a line under the turmoil that engulfed U.K. gilts last fall, confirming on Thursday it has sold all the bonds it bought as part of its efforts to stabilize a market roiled by the government’s ill-fated budget. “The Bank has today completed its sales of the £19.3bn [$23.4 billion] portfolio of temporary holdings of U.K. government bonds purchased in Autumn 2022 on financial stability grounds,” said the BoE.
A debt-funded tax-cutting budget delivered in September by chancellor-at-the-time Kwasi Kwarteng had spooked investors and forced a spiral of bond selling by pension funds who were caught out by highly-geared derivative positions. As gilts were dumped the 30-year yield
TMBMKGB-30Y,
3.637%,
to which pension funds were highly exposed, soared from 3.2% at the start of the month to 5% just four weeks later, a move whose speed threatened not just the pension sector, but also the housing market as mortgage rates jumped and offers were pulled during the uncertainty. The central bank bought £12.1bn of long-dated conventional gilts and £7.2bn of index-linked gilts between 28th September and 14th October to prop up the market and its support has had the desired effect. Thirty-year gilt yields on Thursday were 3.707% a retreat that means the BoE …