The Bank of England doubles its support to the financial market

The daily limit on the purchase of bonds of the Bank of England increased twice. Now it is 10 billion pounds until the end of the week. Also, there was an announcement of a new mechanism in banks to simplify the use of cash through a wider range of assets that can be used as collateral. This program will be applied after the end of the emergency bond-buying program.

The government, represented by Prime Minister Liz Truss, publicly announced £45 billion in unfunded tax breaks on September 23rd. After this announcement, the market began to collapse. Also, the decision of Truss and her finance minister, Kwasi Kwarteng, was to release their mini-budget without independent analysis by the financial supervisor, the Office for Budget Responsibility (OBR) and reasons for government borrowing and economic growth.

There has been a dramatic drop in the pound and UK government bonds. As a consequence, some retirement funds were at the edge of default. They started dumping assets due to the failure of their hedging strategy. Mortgage rates rose sharply.