And all it took was a measly £1 billion - which largely pales in comparison to the sort of bond-buying that took place during the height of the pandemic crisis. As for the timing, it is said that someone needed a bailout and the central bank delivered of course:
- The BOE was worried about margin calls in the gilt market - report
- BOE's bond buying was due to liability-driven investment and links to pensions - report
It's tough to fault Bailey & co. as contagion risk can go a long way, especially in shunning credibility of a roughly £2 trillion market and the sixth largest economy in the world. But as I said yesterday, it is mental to believe that this is being caused by their own government's doing and not some external shock.
In any case, the central bank's action is working as intended but there will be a lot of nervous watchers in the gilt market to see if the effectiveness can be sustained through to the weekend. Whatever happens here will also have spillovers to broader market sentiment, so just be mindful of that in the sessions ahead.
