Bank of England Delays Bond Sales, Launches Temporary Purchase Program After Market Turmoil
Antoine Bouvet, senior rates strategist at ING, said the Bank of England may need to extend the bond purchases beyond the initial two-week period if volatility in the gilt market continues, and that an additional hike to interest rates was not off the table.
Bouvet told CNBC immediately after the announcement that the Bank's first priority for now had to be the functioning of the gilt market, suggesting the worst outcome would be for the sovereign to be left without market access and unable to secure financing. "Clearly the gilt market was caught in a crossfire between the Bank of England and the Treasury, and it's not exactly like that but it looked a lot like they were competing, or working at crossed purposes," Bouvet said.
"So you have a world where you have a recession and the BOE is trying to cool the economy with hikes, and on the other hand you have the Treasury that is trying to shield the economy from that recession and implementing fiscal measures that are inflationary." He added that the Treasury's statement of support was important, noting that the government would be keen to avoid the impression that the gilt market is in"so much trouble" that it had forced the Bank of England to take hold of rescuing the economy.
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