The Bank of England has warned of “a material risk to UK financial stability” and “dysfunction” in part of the pension market despite its unprecedented intervention late last month.
It comes after the cost of government borrowing continued to rise yesterday.
Gilt yields, the interest rate payable on government bonds, rose on Monday, near the 5% highs of 27 September, the day before the Bank made its intervention.
The rise came despite the Bank’s Monday announcement of a potential doubling of spending in its emergency bond buying and extended support for a part of the pensions market.
Tuesday morning’s announcement extended its intervention again. Now the Bank will begin to purchase index-linked gilts, government bonds with interest payments in line with inflation.
The move has been made as a result of “further significant repricing of UK government debt” particularly in index-linked gilts.
