11 October 2022
If you are covering the news that the Bank of England has widened its gilt purchase operations to include index-linked gilts, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“This morning the Bank of England has once again felt the need to intervene in the fixed income market following yesterday’s announcement as it seeks to calm nerves and return stability to government bond markets. We are in somewhat unprecedented territory here and as a result yields continue to climb higher as investor fears are yet to be eased.
“The move by the BoE today to include index-linked gilts in their emergency quantitative easing programme is probably sensible given the massive rise in yields that occurred yesterday, however, it is going to be an incredibly difficult balancing act at a time when the Bank wants to be raising interest rates in order to bring inflation down. It is stuck between a rock and the hard place in combatting inflation at the same time as fiscal policy causes shockwaves in markets. As a result, we expect gilt markets to remain volatile ahead of the Chancellor’s fiscal plan speech at the end of the month and potentially beyond as it remains to be seen how effective the government’s growth plan will be.”
