The Bank of England will delay the start of its active gilt sales until Oct 31 and make temporary purchases to stabilise the longer-end of the bond market after the steep sell-off of recent days, policymakers said in a statement on Wednesday.

Saying that continuing dysfunction would be a “material risk to UK financial stability”, the BOE said it would make “temporary and targeted” purchases “at an urgent pace”.

The purchases will take place from today through Oct 14 and will be unwound “in a smooth and orderly fashion” when risks to market functioning subside, it said.

Following the Financial Policy Committee’s recommendation, the BOE will postpone its active gilt sales programme until Oct 31, though it maintains its overall target of reducing the stock of gilts by GBP 80 billion in the first year. The Monetary Policy Committee reiterated that it will not hesitate to change interest rates by as much as needed to return inflation to target sustainably. (See MNI INSIGHT: Emergency Hike Out Of Character For BOEBOE)

UK gilts rallied across the board following the announcement, with the yield on the benchmark 30-year 2051 bond last trading at 4.45%, having touched 5.05% earlier.

Yield on UK 30-year Gilt over last two trading sessions

Source: Bloomberg