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https://www.bankofengland.co.uk/markets/market-notices/2022/september/market-notice-28-september-2022-gilt-market-operations

"This Market Notice sets out details of the Bank’s temporary purchases of long-dated UK government bonds from 28 September 2022.

As set out in the accompanying press notice, in line with the Bank of England’s financial stability objective, the Bank will carry out purchases of long dated gilts in a temporary and targeted way. The purpose of these purchases is to restore orderly market conditions. "

Isn't this the only thing that makes government bonds attractive (that they might be bought back in times of uncertainty like this).

It seems interesting they have a minimum of £5m for buying back bonds as well as having a maximum amount they can invest overall of £5bn - kinda sounds like they'll only buy back 1000, or can companies pay other companies a fee to batch their bonds together into one large bond the bank could then buy.

A 20 year bond sounds long too, I remember it being said pension schemes are one of the main holders of these bonds and that would make sense. I wonder where those funds will move though, if they're just going to be held in cash and the manager wants an exit from the bond or if they'll be converted into stocks/property over time - doesn't look like enough to cause a bubble unless they mess up.

I don't really understand what they are doing.
As a rule, the profit on long-term bonds for 20-30 years was always higher than the profit on short-term bonds of 2-5 years. Now the situation is reversed, because everyone needs money.
The bank puts out the fire with money and buys long-term bonds to make them more popular.
It is difficult in a crisis to force investors to buy long-term bonds when it is better to be with money and buy shares of fundamental enterprises that have fallen in price.

Launching a quantitative easing program during the period of increasing the key rate is like pressing the brake and gas at the same time.

The UK has serious problems with servicing the public debt. This usually ends in devaluation or default.

That's the security of government bonds of a stable economy. Gilt bonds are mostly purchased by the institutional investors and they usually invest a lot of money into such bonds. It's good to see that UK government is solvent and is able to deliver on their commitments.

However, I noted that this is actually not a buyback of expired bonds, but ongoing bonds which will be done through auctions. Not sure what's the strategy behind this but I am sure that the UK market will cheer about this news!

So this money will not go into the real economy, but it will remain in the financial sector. There is no question of default here. If I understand correctly, the bank wants to make 20-30 year bonds profitable for investors. But all the inhabitants of the country will pay for it.

If the UK had anything worth exporting, it might just about qualify as a Banana Republic these days.  But it doesn't, so it's even worse than one.    ::)

Willful malice from the government.  A desperate patch-job from the Bank of England.  Various markets and international bodies reacting poorly to every new development.  By almost every metric fathomable, it's not looking encouraging for the UK's future.  

Just when you think the government in the UK cannot get any worse, they manage to pull something out of the hat. A prime minister that only 200k~ party members voted for has managed to start her position in the most dire and awful way possible - cutting taxes in a way the benefit the super rich the most, cutting back taxes on house purchases (which happened in covid as well and only fueled already high house prices) and totally ignoring any independent financial analysis when making decisions. The current chancellor is an absolute joke and who knows how he got the job. They were trying to spur growth with tax cuts, but the whole world has zero faith this is a good idea so an perceived benefit has been lost due to the pound plummeting afterwards.

I was wondering if the Bank of England might buy the pound on FOREX under QE to strengthen it. That appears to be something the united states could be doing with its own currency atm. Although I could be underestimating the value global investors place on the US economy.

I think in 2020 or 2021 the federal reserve also bought up a large segment of the US bond market. It would seem that the UK is following in the feds footsteps as far as its bond purchasing go.

Japan and china were two of the largest holders of US bonds. Federal reserve purchasing of US bonds could have bailed both nations out on any losses they might have sustained HODL'ing them.

Not certain on who the largest HODLers of UK bonds are. The bank purchasing bonds from the largest HODLers could save them from taking losses during an economic downtrend. But there are other motives and reasons which could be behind it as well.

You forgot one thing, which I didn't see in the other comments either. What Truss wanted to do is cut taxes and increase spending, which is crazy. It's as if a family that is having trouble making ends meet because they have several loans and high fixed expenses, comes up with the solution to the problem of taking more loans and working less.

UK cuts taxes, boosts spending, accelerating pound’s slide (https://apnews.com/article/inflation-economy-liz-truss-62a86ff2e88ee60b3e8773419fe7d4d2)

Tax cuts tend to work if they are accompanied by reducing public expenditure, not the other way around. I can also be a UK PM like that: I cut taxes so that people have more money available and I spend more from the government so that people have better services and stimulate the economy with public spending. The problem is, it's a direct path to bankruptcy and that's how the markets have understood it.

I will not give links, but in many European countries inflation is now 10-20%. In England, inflation is about 10%. European countries lived very well by buying cheap resources in Russia and other countries, and now you have to pay market prices, and their economy will lose to the economies of the United States and China.

I think resuming quantitative easing is way too early to increase the liquidity in its financial system; in my opinion, the current economic conditions of the UK aren't that suitable to resume QE while raising the critical rate.
Moreover, it would badly impact the Bank of England's stability, and restoring orderly market conditions would be challenging.

That's why they described it as an "emergency measure".  They know there are consequences and it's going to bite them later.  The Bank of England still felt it had to be done, if only as a short term remedy, to counteract the foolishness of the government.  The ruling party in the UK is arguably doing more damage than the BoE can fix anyway.  It's all just rearranging the deck chairs on the Titanic at this stage.

Since September 28, the Bank of England has made temporary and targeted purchases of long-term UK government bonds in accordance with its goal of promoting financial stability. On October 10th, the Bank raised the ceiling for its daily auctions from £5 billion to £10 billion. On October 11, index-linked government bonds were added to the temporary purchase program.

https://www.bankofengland.co.uk/news/2022/october/statement-on-end-of-gilt-market-operations

This could be winter coming back to UK one more time then ? I’m not surprised why are they doing so and after Queens rule ended things got messy somehow. May be there was some impact of her in the royal house and the way it was working. With her fallen age it could have been possible that there were some royal issue and slowly UK went on the downhill road really. With war and pandemics thing escalated to all new level thus making situation darken. Now the worst thing is dollar is getting way powerful as inflation hits and various currencies struggles including sterling pound.

They are basically working towards making sure that the inflation rates go up and that is a problem. I have to say the best thing that UK could have done would be increasing the rates, and they did not do that and instead they have put more money into the world, which means more money equals less valuable money and that equals more inflation.

With this move it may not be a lot, it’s not a huge amount of money that would increase the inflation all that much, but it is still the wrong move, and wrong way they are going, they should turn it around and do the opposite, find a way to take money out of the market, and not put more money into it.

The Bank of England may need to intervene again, shortly.  Sounds as though the new Prime Minister is on their last legs already.  Markets will likely react badly to yet another new leader in such a short space of time.  The UK has effectively descended into farce.

//EDIT:  Yep, another one bites the dust.  Pantomime season has clearly started early this year.  Bye Liz!

Maybe I'm a bad specialist and I don't understand anything in economics, but the biggest markets in the world are the bond markets. If inflation in a country exceeds bond yields, then investors will sell bonds and flee the country.
According to various estimates, only the rise in oil and gas prices increased inflation by 5-15%.

I stand corrected.  The Pound has actually risen following the resignation of that vapid wooden doorstop known as Truss.  Markets seem generally pleased with the news, which I guess shouldn't be surprising, given how shit a Prime Minister she was:

https://www.bbc.co.uk/news/business-63326809

Perhaps they should start produce something.
If nothing works they can always print more yes inflation Will go high but np 😁 everybody will use btc against inflation but GBP could be just like Zimbabwe dollar lol

In order to produce goods, you need cheap labor, cheap resources, cheap credit, and cheap logistics.
In Europe, there are no such conditions now, so competitors from the USA and China will win this battle.The UK will be a major financial hub.