Bank of England ends government bond-buying scheme

*First published at Kent Buzz*

The Bank of England is set to stop their government bond-buying scheme today after intervening on behalf of the UK’s financial markets.

The pressure on gilts – UK government bonds – eased yesterday following an increased market sentiment encouraged through Bank of England bond-buying activity.

It promised to buy up to £65bn in government bonds from those who wanted to sell them but has steadied the market enough through total bond buying of £17.8bn.

Governments sell bonds to banks and investors to increase public spending, which on Wednesday had yields as high as 5.1%, and investors reap annual profit from these and have their initial investment returned once the bond expires.

Bank of England, London, which has insisted its emergency bond-buying scheme following the Chancellor’s mini-budget will come to a close. (PA Wire/PA Images)

Fundamentally, the Bank of England’s action has helped prop up pension funds at a time when there is global strain on financial pressures.

The rate (and price) at which bonds are sold depends on confidence that the Government will be able to repay their debt once a bond matures.

However, with growing concerns amidst the cost-of-living crisis, and confidence in the UK economy extremely low, bond prices have fallen also.

Chancellor Kwasi Kwarteng and Prime Minister Liz Truss are now under pressure to reinstate a planned increase in corporation tax, soothing the markets and responding to public backlash.