Bank warns of material risk to financial stabilityon October 11, 2022 at 7:17 am

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The Bank of England steps in for a second day running to boost its emergency bond-buying scheme.

Bank of England, City of LondonImage source, Getty Images

The Bank of England has been forced to step in for a second day running to boost its emergency bond-buying scheme.

The emergency move came as it warned a sell-off of government bonds was a “material risk” to financial stability.

The Bank said it would buy a wider range of bonds to help “restore orderly market conditions”.

On Monday, government borrowing costs rose sharply after the Bank increased the amount of bonds it was buying before the scheme ends on Friday.

The Bank is hoping its latest move will guard against “dysfunction” in the debt market.

It said it had seen a “further significant repricing” of government bonds since the start of the week.

“Dysfunction in this market, and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to UK financial stability,” it warned.

The Bank’s move came after its announcement on Monday to double the amount of bonds it would buy alongside chancellor Kwasi Kwarteng’s decision to bring forward the date of his plan to balance the government’s finances failed to reassure markets.

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