BREAKING: Bank of England will purchase bonds to bring down yields

Bank of England issued a statement saying that it will carry out temporary purchases of long-dated UK bonds starting from today (September 28, 2022) and lasting until October 14, 2022. The Bank said that purchases will be made in whatever scale is necessary to achieve the desire outcome. The Bank also said that MPC will not hesitate to change interest rates by as much as needed to bring inflation back to 2%. This is a major pivot from BoE as the Bank announced at a meeting last week that it will begin active bond sales in October. Those active sales have been now postponed until October 31, 2022. Of course, reason behind the move is a spike in UK yields triggered by the announcement of new UK fiscal measures.

A knee-jerk reaction was a jump in equity market indices as well as GBP while USD weakened against major G10 currencies. However, moves on the FX markets were mostly erased within minutes while indices held onto gains.

GBPUSD saw a massive jump in volatility after the BoE statement. Range of moves (low-to-high) exceeds 2%. Source: xStation