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MNI BRIEF: BOE Boosts Market Support Measures

(MNI) LONDON

The Bank of England said Monday it will end is longer-dated gilt market operations on October 14, but in the meantime, each daily intervention will buy up to a maximum GBP 10 billion per day, up from the previously announced GBP 5 billion. In addition, the central bank said it will launch a Temporary Expanded Collateral Repo Facility, which will enable will banks to help ease liquidity pressures facing LDI funds through liquidity insurance operations.

The BOE said it also stood ready to support further liquidity issues facing LDI funds through its regular weekly long-term repo operations (LTRO).

A surge in gilt yields following the UK government's 'mini budget' on September 23 triggered collateral issues for certain pension fund investors, which prompted the BOE to step in with market support measures on Sept 28. These have helped steady the market, taking pressure off of the funds and the latest measures are an attempt by the bank to draw much of the poison from the issue by the end of this week.

However, the volatility in gilt markets in recent weeks could yet be a test for both the government and the Bank of England, as the sharp fall in the value of the BOE's total gilt holdings could trigger large payments from the Treasury to the Bank under the terms of the QE indemnity agreement in place between the two institutions (See our markets team's recent analysis MNI: BOE APF indemnity to trigger gilt issuance surge)

MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
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MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
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