Bank of England confirms emergency bond-buying scheme will end on Friday

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The Bank of England has confirmed that its emergency bond buying scheme will be closed on Friday, despite reports that it is considering extending the program.

The bank said other measures taken in recent days will be in place after October 14 “to ease liquidity pressure on LDI (liability-oriented investment)”.

A Bank representative added: “As the Bank has made clear from the outset, its temporary and targeted purchases of gilts will end on October 14th.

“Yesterday, the governor confirmed this position, and it was absolutely clearly represented in contacts with banks at the highest level.”

The Bank of England has reportedly “privately signaled to the bankers” a possible delay if market turmoil “flares up” again over the debt-financed UK budget, citing people briefed on the discussions. This is despite bank governor Andrew Bailey warning that pension funds have “three days left” before the support ends.

Several bankers informed

The bank on Tuesday, ahead of Mr Bailey’s speech, said officials were monitoring whether so-called liability-focused investment managers, who help pension funds manage risk in their portfolios, have been able to accumulate enough cash reserves to allow their clients to satisfy margin calls, Financial Times reported.

The Bank of England has struggled to reassure investors after unveiling additional measures to calm markets shaken by the UK government’s recent tax cuts.

“We believe a rebalancing should be done, and I’m writing to the participating funds and all the firms involved in managing these funds: you have three days left,” Mr. Bailey said last night.

“You have to do it,” he said at a speech at the Institute of International Finance in Washington.

Those remarks sent sterling down to $1.0924 yesterday, with traders spooked at the prospect of more selling after the BoE removes support.

The bank was forced to intervene to buy up government bonds after market turmoil following Chancellor Kwasi Kwarteng’s mini-budget pushed some pension funds to the brink of collapse.

So far, he hasn’t spent close to the £65bn he has earmarked for potential market support.

The Pensions and Lifetime Savings Association (PLSA) said the pension funds’ “primary concern” is to ensure that the bond-buying scheme is not closed too soon. The PLSA, which represents pension schemes that provide retirement income to more than 30 million contributors, has proposed that the emergency measures continue until at least the end of October.

The authority said that market turbulence has put “significant pressure” on the securities market and pension funds using LDI (liability-oriented investment). The authority said most pension funds have used LDI “carefully” and have taken steps to further improve their financial strength.

This comes after the UK economy contracted 0.3% in August. Grant Fitzner, chief economist for the Office for National Statistics, said the contraction was driven by cuts in both manufacturing and services.

“Oil and gas production has declined as planned summer maintenance in the North Sea has been more frequent than usual,” Mr. Fitzner said. “A notable decline was also seen in most of the production.

“Health care has also contributed to the decline in hospital consultations and surgeries.”

Business Secretary Jacob Rees-Mogg told Sky News on Wednesday that the 0.3% cut was “a small amount in a very large economy” and said “a lot of numbers are coming up and being revised later.”

“The indicators of the previous quarter showed a reduction [and] then revised to show economic growth. So be very careful how you interpret the numbers immediately after they are released,” the business secretary said.

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