# Bank of England statement on purchase of long-dated bonds Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-09-28 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Bank of England launches temporary bond purchase programme Meta Description: Stay updated on the Bank of England's temporary bond purchase programme to stabilize markets and its impact on UK financial stability. URL: https://financedigest.com/bank-of-england-statement-on-purchase-of-long-dated-bondshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-09-28t101646z1lynxmpei8r0g6rtroptp4britain-economy-1736815139607-compressed.jpg) LONDON (Reuters) – The Bank of England said on Wednesday it would start a temporary programme of bond purchases to stabilise the market, and postpone the planned start of its gilt sale programme. Below is the full text of the central bank’s statement: “As the Governor said in his statement on Monday, the Bank is monitoring developments in financial markets very closely in light of the significant repricing of UK and global financial assets. This repricing has become more significant in the [past day](https://www.financedigest.com/groundhog-day-banks-continue-to-fall-into-the-traps-of-the-past.html "Groundhog Day: banks continue to fall into the traps of the past") – and it is particularly affecting long-dated UK government debt. Were dysfunction in this market to continue or worsen, there would be a material [risk to UK financial](https://www.financedigest.com/financial-risks-of-climate-change-overplayed-senior-hsbc-banker-says.html "Financial risks of climate change overplayed, senior HSBC banker says") stability. This would lead to an unwarranted tightening of [financing conditions and a reduction of the flow of credit](https://www.financedigest.com/allianz-trade-wins-global-banking-finance-reviews-best-trade-credit-insurance-company-asia-pacific-2022.html "Allianz Trade wins Global Banking & Finance Review’s Best Trade Credit Insurance Company Asia Pacific 2022") to the real economy. In line with its financial stability objective, the [Bank of England stands ready](https://www.financedigest.com/are-banks-ready-for-the-new-accountability-regime-in-2016.html "ARE BANKS READY FOR THE NEW ACCOUNTABILITY REGIME IN 2016?") to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses. To achieve this, the [Bank will carry out temporary purchases of long-dated UK government](https://www.financedigest.com/governments-and-central-banks-risk-inflation-bank-of-england-has-done-its-bit-now-the-politicians-turn.html "Governments and central banks risk inflation, Bank of England has done its bit, now the politicians’ turn") bonds from 28 September. The purpose of these purchases will be to restore orderly [market conditions](https://www.financedigest.com/condition-monitoring-service-market-buoyant-with-flourishing-power-generation-industry-adoption-exhibits-a-notable-decline-amid-covid-19-pandemic-fmi.html "Condition Monitoring Service Market Buoyant with Flourishing Power Generation Industry; Adoption Exhibits a Notable Decline Amid COVID-19 Pandemic: FMI"). The purchases will be carried out on whatever scale is necessary to effect this outcome. The [operation will be fully indemnified by HM Treasury](https://www.financedigest.com/libor-reform-should-trigger-a-major-reassessment-of-corporate-treasuries-data-operations.html "LIBOR reform should trigger a major reassessment of corporate treasuries’ data operations"). On 28 September, the [Bank of England’s](https://www.financedigest.com/bank-of-england-fines-former-tsb-executive-over-2018-it-failure.html "Bank of England fines former TSB executive over 2018 IT failure") Financial Policy Committee noted the risks to UK financial stability from dysfunction in the gilt market. It recommended that action be taken, and welcomed the Bank’s plans for temporary and targeted purchases in the gilt [market on financial](https://www.financedigest.com/the-political-wildcard-what-is-trumps-us-presidential-nomination-doing-to-financial-markets.html "The political wildcard: What is Trump’s US presidential nomination doing to financial markets?") stability grounds at an urgent pace. “These purchases will be strictly time limited. They are intended to tackle a specific problem in the long-dated government [bond market](https://www.financedigest.com/how-will-the-ecb-contain-fragmentation-risk-in-euro-area-bond-markets.html "How will the ECB contain fragmentation risk in euro area bond markets?"). Auctions will take place from today until 14 October. The purchases will be unwound in a smooth and orderly fashion once risks to [market functioning](https://www.financedigest.com/baby-food-industry-will-turn-to-drive-sales-growth-of-functional-dairy-ingredient-market-fact-mr-report.html "Baby Food Industry Will Turn To Drive Sales Growth Of Functional Dairy Ingredient Market, Fact.MR Report") are judged to have subsided. The Monetary Policy Committee has been informed of these temporary and targeted [financial stability](https://www.financedigest.com/digital-pound-could-hit-financial-stability-and-erode-privacy-uk-lawmakers-warn.html "Digital pound could hit financial stability and erode privacy, UK lawmakers warn") operations. This is in line with the Concordat governing the MPC’s [engagement with the Bank’s](https://www.financedigest.com/how-conversational-commerce-can-help-banks-engage-with-millennials.html "How conversational commerce can help banks engage with Millennials") Executive regarding balance sheet operations. As set out in the Governor’s statement on Monday, the MPC will make a full assessment of [recent macroeconomic developments at its next scheduled meeting](https://www.financedigest.com/the-recent-bank-of-england-meeting-the-biggest-rate-hike-recession-warning-and-the-fallout.html "The recent Bank of England meeting, the biggest rate hike, recession warning and the fallout") and act accordingly. The MPC will not hesitate to change interest rates by as much as [needed to return inflation](https://www.financedigest.com/bank-of-england-still-needs-to-see-the-job-through-on-inflation-pill.html "Bank of England still needs to ‘see the job through’ on inflation: Pill") to the 2% target sustainably in the medium term, in line with its remit. The MPC’s annual [target of an £80bn stock](https://www.financedigest.com/rivian-stock-less-bruised-than-tesla-as-both-miss-ev-targets.html "Rivian stock less bruised than Tesla as both miss EV targets") reduction is unaffected and unchanged. In light of current market conditions, the [Bank’s Executive has postponed the beginning of gilt sale](https://www.financedigest.com/stocks-rise-after-bank-sale-fuels-investor-risk-appetite.html "Stocks rise after bank sale fuels investor risk appetite") operations that were due to commence next week. The first gilt [sale operations will take place on 31 October](https://www.financedigest.com/uk-new-car-sales-up-by-nearly-a-quarter-in-october-smmt.html "UK new car sales up by nearly a quarter in October – SMMT") and proceed thereafter. The [Bank will shortly publish a market](https://www.financedigest.com/hsbc-appoints-new-markets-head-amid-wider-investment-bank-reshuffle.html "HSBC appoints new markets head amid wider investment bank reshuffle") notice outlining operational details. (Reporting by Sachin Ravikumar; editing by William James) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---