Bank of England cautions that significant risks of financial crisis in Great Britain still remain

Additional support from the Bank of England was provided for the British markets, which are still shaken by recent government statements in favor of tax reduction and increasing the volumes of borrowing. This was the second time in two days when such type of support was demanded from the bank.

The central financial organization of Great Britain has released a statement, warning against the remaining risks to the country’s financial stability. Those risks are linked to an abrupt sale of government bonds, which resulted in both yields and borrowing costs getting significantly higher. This, in its turn, made some pension funds sell off their assets to gain cash.

In the statement released by the Bank, such a slump in this type of bonds was called the newest source of danger.

As it was said in the statement, this market’s dysfunction imposes a significant threat to the country’s financial stability, along with a possibility of creating a situation in which ‘fire sale’ dynamics would reinforce itself.

According to information provided by Reuters, a tense situation on the bond market became particularly obvious on Tuesday. The sell-off of 900 million pound sterling (which is $994 million) of index-linked gilts due in 2051 performed by the UK government became the event that highlighted the situation. Index-linked gilts were sold at the 14-year record yield.

Index-linked gilts will be included in the government’s emergency 65 billion pound sterling ($71.7 billion) bond-buying program on Tuesday. The program was announced at the end of the previous month. As it was stated by the Bank of England, all these actions would become additional factors of restoring orderly market conditions.

The Bank added that the program was intended to be finished on Friday, and it would be performed according to the plan despite the requests of its continuation for three more weeks.