The Bank of England moved Wednesday to quell a financial market revolt, announcing that it would temporarily buy an unlimited amount of government bonds to prevent disorderly trading from destabilizing the British economy.

After the government unveiled its proposal Friday, investors fearing it would aggravate 10 percent inflation dumped government bonds and the British pound.

Reaction in the government bond market was particularly intense. By Tuesday, bondholders were demanding roughly 5 percent to lend the British government money for 30 years.

With sellers outnumbering buyers, the central bank stepped in today to reassure investors that it would buy government bonds “on whatever scale is necessary” to ensure that trading remains orderly.

https://www.washingtonpost.com/world/2022/09/28/boe-uk-pound-intervention/

TAGS: September 2019, REPO, 8-4= a gift to government

https://youtu.be/ll1iyllPqT0?t=74

On Wednesday, September 28, 2022 at 1:53:56 PM UTC-4, chromebook test wrote:

> The Bank of England moved Wednesday to quell a financial market revolt, announcing that it would temporarily buy an unlimited amount of government bonds to prevent disorderly trading from destabilizing the British economy.

The BOE now joins the BOJ and ECB in having to print money despite high inflation, in order to support their sovereign bond markets

https://twitter.com/LynAldenContact/status/1575124535115931653

-----------

Remix - Extended

https://www.youtube.com/watch?v=ltz7-nrEbcM

On Wednesday, September 28, 2022 at 5:24:08 PM UTC-4, chromebook test wrote:
> On Wednesday, September 28, 2022 at 1:53:56 PM UTC-4, chromebook test wrote:
>
> > The Bank of England moved Wednesday to quell a financial market revolt, announcing that it would temporarily buy an unlimited amount of government bonds to prevent disorderly trading from destabilizing the British economy..
> The BOE now joins the BOJ and ECB in having to print money despite high inflation, in order to support their sovereign bond markets
>
> https://twitter.com/LynAldenContact/status/1575124535115931653

“At some point this morning I was worried this was the beginning of the end,” said a senior London-based banker, adding that at one point on Wednesday morning there were no buyers of long-dated UK gilts. “It was not quite a Lehman moment. But it got close.”

https://www.ft.com/content/756e81d1-b2a6-4580-9054-206386353c4e

Why are UK bonds called gilts?

They are called gilts because the original certificates issued by the British government had gilded edges.

On Wednesday, September 28, 2022 at 5:34:45 PM UTC-4, chromebook test wrote:
> On Wednesday, September 28, 2022 at 5:24:08 PM UTC-4, chromebook test wrote:
> > On Wednesday, September 28, 2022 at 1:53:56 PM UTC-4, chromebook test wrote:
> >
> > > The Bank of England moved Wednesday to quell a financial market revolt, announcing that it would temporarily buy an unlimited amount of government bonds to prevent disorderly trading from destabilizing the British economy.

> > The BOE now joins the BOJ and ECB in having to print money despite high inflation, in order to support their sovereign bond markets
> >
> > https://twitter.com/LynAldenContact/status/1575124535115931653

> “At some point this morning I was worried this was the beginning of the end,” said a senior London-based banker, adding that at one point on Wednesday morning there were no buyers of long-dated UK gilts. “It was not quite a Lehman moment. But it got close.”
>
> https://www.ft.com/content/756e81d1-b2a6-4580-9054-206386353c4e
>
>
>
>
>
> Why are UK bonds called gilts?
>
> They are called gilts because the original certificates issued by the British government had gilded edges.

Bank of England launches £65bn move to calm markets
September 28, 2022
https://www.ft.com/content/756e81d1-b2a6-4580-9054-206386353c4e

The Bank of England took emergency action on Wednesday to avoid a meltdown in the UK pensions sector, unleashing a £65bn bond-buying programme to stem a crisis in government debt markets.

The central bank warned of a “material risk to UK financial stability” from turmoil in the gilts market, which was sparked by chancellor Kwasi Kwarteng’s tax cuts and borrowing plan last week.

The BoE suspended a programme to sell gilts — part of an effort to get surging inflation under control — and instead pledged to buy long-dated bonds at a rate of up to £5bn a day for the next 13 weekdays.

Economists warned the injection of billions of pounds of newly minted money into the economy could fuel inflation. “This move will be inflationary at a time of already high inflation,” said Daniel Mahoney, UK economist at Handelsbanken.

UK government bond markets recovered sharply after the announcement. The pound rose 1.4 per cent on the day by evening trading in London, reaching $1.0877 against the dollar.

The bank stressed it was not seeking to lower long-term government borrowing costs. Instead it sought to buy time to prevent a vicious circle in which pension funds have to sell gilts immediately to meet demands for cash from their creditors.

That process had put pension funds at risk of insolvency, because the mass sell-offs pushed down further the price of gilts held by funds as assets, requiring them to stump up even more cash.

“At some point this morning I was worried this was the beginning of the end,” said a senior London-based banker, adding that at one point on Wednesday morning there were no buyers of long-dated UK gilts. “It was not quite a Lehman moment. But it got close.”

The most directly affected groups were final salary pension schemes that have hedged to ensure their ability to make future payments — so-called liability-driven investment strategies that are very sensitive to fast-moving gilt yields.

“It appears that some players in the market ran out of collateral and dumped gilts,” said Peter Harrison, chief executive of Schroders, which has $55bn in global LDI business. “We were more conservatively positioned and we had enough collateral to meet all of our margin calls..”

But a senior executive at a large asset manager said they had contacted the BoE on Tuesday warning that it needed “to intervene in the market otherwise it will seize up” — but the bank failed to act until Wednesday. It declined to comment.

Bank of England goes into full crisis management mode

Cardano Investment, which manages LDI strategies for about 30 UK pension schemes with roughly £50bn of assets, said it had written to the BoE on Wednesday.

“If there was no intervention today, gilt yields could have gone up to 7-8 per cent from 4.5 per cent this morning and in that situation around 90 per cent of UK pension funds would have run out of collateral,” said Kerrin Rosenberg, Cardano Investment chief executive. “They would have been wiped out.”

At a meeting with the chancellor earlier on Wednesday, bankers had urged Kwarteng not to wait until a planned statement on November 23 to take action to calm the markets with a new plan to cut debt.

One person at the meeting, which included Citi, Bank of America, UBS, JPMorgan, Deutsche Bank and Standard Chartered, said that date was too far off. Kwarteng’s allies insisted he was sticking to his timetable.

Following the BoE’s intervention, Labour leader Sir Keir Starmer called for parliament to be recalled and for Kwarteng to abandon his plans.

Kwarteng attempted to reassure markets by telling government departments to identify efficiency savings, reminding them they would have to live within very tight spending limits, already set until 2025.

But some Conservative MPs believe Kwarteng’s reputation has been shredded by the chaos of the last few days and cannot survive as chancellor, while some argue prime minister Liz Truss must change course.

The global backlash to UK tax cuts

Kwarteng’s allies said he would not resign, while one government insider said of Truss: “She’s very much not in the mood to budge and wants to tough it out.” Truss and Kwarteng said nothing publicly on Wednesday.

Andrew Griffith, City minister, said the government would stick to its strategy: “We think they’re the right plans because those plans make our economy competitive,” he said.

But Tory anger is mounting, with some warning that Truss faces a rebellion on key legislation — including possibly on the finance bill to enact the new package — when MPs return to the Commons in October.

Simon Hoare, Tory MP for North Dorset, tweeted: “These are not circumstances beyond the control of Govt/Treasury. They were authored there. This inept madness cannot go on.”

The BoE took the emergency measure after Kwarteng’s fiscal package last week sent the pound tumbling and set off historic falls in gilt prices..

After the announcement, 30-year gilt yields, which earlier on Wednesday had touched a 20-year high above 5 per cent, fell 1 percentage point to 4 per cent — their biggest drop for any single day on record, according to Tradeweb data. Yields fall when prices rise. Ten-year yields slipped to 4..1 per cent from 4.59 per cent.

The Treasury blamed “significant volatility” in “global financial markets”.

------------

Domino Dancing
https://www.youtube.com/watch?v=y97rBdSYbkg

On Wednesday, September 28, 2022 at 1:53:56 PM UTC-4, chromebook test wrote:
> The Bank of England moved Wednesday to quell a financial market revolt, announcing that it would temporarily buy an unlimited amount of government bonds to prevent disorderly trading from destabilizing the British economy.
>
> After the government unveiled its proposal Friday, investors fearing it would aggravate 10 percent inflation dumped government bonds and the British pound.
>
> Reaction in the government bond market was particularly intense. By Tuesday, bondholders were demanding roughly 5 percent to lend the British government money for 30 years.
>
> With sellers outnumbering buyers, the central bank stepped in today to reassure investors that it would buy government bonds “on whatever scale is necessary” to ensure that trading remains orderly.
>
>
> https://www.washingtonpost.com/world/2022/09/28/boe-uk-pound-intervention/
>
>
>
>
> TAGS: September 2019, REPO, 8-4= a gift to government
>
> https://youtu.be/ll1iyllPqT0?t=74

Richmond Fed President Tom Barkin said derivatives held by UK pension funds that forced central bank intervention this week warrant US regulators monitoring “comparable instruments … that would have that kind of distribution, and that kind of leverage.”
https://twitter.com/NickTimiraos/status/1575932284955496449

“Volatility vortex” is a polite way to say “US govt Balance of Payments problem similar to the one that just forced the BOE back into QE despite elevated inflation.”
"Volatility vortex’ slams into $24tn US government bond market | Financial Times (via DC)
https://twitter.com/LukeGromen/status/1575857715607470080

Closed Board Meeting on October 3, 2022
https://www.federalreserve.gov/aboutthefed/boardmeetings/20221003closed.htm

--------------

https://www.youtube.com/watch?v=vEzl-sLog98

https://groups.google.com/g/rec.arts.tv/c/mdVK3seQFiI/m/kVA8UsqnAwAJ

On Friday, September 30, 2022 at 8:30:51 PM UTC-4, chromebook test wrote:
> On Wednesday, September 28, 2022 at 1:53:56 PM UTC-4, chromebook test wrote:
> > The Bank of England moved Wednesday to quell a financial market revolt, announcing that it would temporarily buy an unlimited amount of government bonds to prevent disorderly trading from destabilizing the British economy..
> >
> > After the government unveiled its proposal Friday, investors fearing it would aggravate 10 percent inflation dumped government bonds and the British pound.
> >
> > Reaction in the government bond market was particularly intense. By Tuesday, bondholders were demanding roughly 5 percent to lend the British government money for 30 years.
> >
> > With sellers outnumbering buyers, the central bank stepped in today to reassure investors that it would buy government bonds “on whatever scale is necessary” to ensure that trading remains orderly.
> >
> >
> > https://www.washingtonpost.com/world/2022/09/28/boe-uk-pound-intervention/
> >
> >
> >
> >
> > TAGS: September 2019, REPO, 8-4= a gift to government
> >
> > https://youtu.be/ll1iyllPqT0?t=74
> Richmond Fed President Tom Barkin said derivatives held by UK pension funds that forced central bank intervention this week warrant US regulators monitoring “comparable instruments … that would have that kind of distribution, and that kind of leverage.”
> https://twitter.com/NickTimiraos/status/1575932284955496449
>
>
>
>
> “Volatility vortex” is a polite way to say “US govt Balance of Payments problem similar to the one that just forced the BOE back into QE despite elevated inflation.”
> "Volatility vortex’ slams into $24tn US government bond market | Financial Times (via DC)
> https://twitter.com/LukeGromen/status/1575857715607470080
>
>
>
> Closed Board Meeting on October 3, 2022
> https://www.federalreserve.gov/aboutthefed/boardmeetings/20221003closed.htm
>
>
>
>
> --------------
>
>
> https://www.youtube.com/watch?v=vEzl-sLog98
>
>
> https://groups.google.com/g/rec.arts.tv/c/mdVK3seQFiI/m/kVA8UsqnAwAJ

TL:DR: No one is willing to loan money to the US gub-mint, via treasuries, to finance US gub-mint deficit spending

The 10-year Treasury yield, a key benchmark for global borrowing costs, has surged to more than 4 per cent from 3.2 per cent at the end of August, leaving it set for the biggest monthly rise since 2003. It is on track for its sharpest ever annual rise. The two-year yield, more sensitive to fluctuations in US monetary policy, has leapt 3.55 percentage points this year, which would also mark a historic increase.

The big price movements have left investors wary of trading in a market that acts as the bedrock of the global financial system and is typically considered a haven during times of stress.

With investors on the sidelines, liquidity in the Treasury market — the ease with which traders buy and sell — has deteriorated to its worst level since March 2020, according to a Bloomberg index. Poor liquidity tends to exacerbate price swings, worsening volatility.

In a sign of how the fraught conditions are keeping some fund managers away, the US has drawn lacklustre demand at sales this week for a combined $87bn in new debt.

A two-year issuance on Monday priced at a high yield of 4.29 per cent, while a five-year deal one day later priced at 4.23 per cent — both marking the highest borrowing costs for the government since 2007.

The two-year debt was sold with the widest difference — or “tail” — between what was expected just before the auction and where it actually priced since the 2020 Covid-induced market ructions, said Tom Simons, a money market economist at US investment bank Jefferies..

The Treasury department will auction off $36bn in seven-year notes on Wednesday. The seven-year note has struggled to attract demand in less volatile moments, so the environment this week could pose a challenge.

“Until there is more certainty I think we will continue to have this ‘buyers’ strike,’” Simons said. “The markets are so crazy that it’s hard to price any kind of new [longer-dated bonds] coming into the market.”

‘Volatility vortex’ slams into $24tn US government bond market

https://www.ft.com/content/ea41ce6d-e8b2-465e-8dff-8b7fa71dc7b4

https://docdro.id/PpPFje9

On Friday, September 30, 2022 at 9:15:17 PM UTC-4, chromebook test wrote:
> On Friday, September 30, 2022 at 8:30:51 PM UTC-4, chromebook test wrote:
> > On Wednesday, September 28, 2022 at 1:53:56 PM UTC-4, chromebook test wrote:
> > > The Bank of England moved Wednesday to quell a financial market revolt, announcing that it would temporarily buy an unlimited amount of government bonds to prevent disorderly trading from destabilizing the British economy.
> > >
> > > After the government unveiled its proposal Friday, investors fearing it would aggravate 10 percent inflation dumped government bonds and the British pound.
> > >
> > > Reaction in the government bond market was particularly intense. By Tuesday, bondholders were demanding roughly 5 percent to lend the British government money for 30 years.
> > >
> > > With sellers outnumbering buyers, the central bank stepped in today to reassure investors that it would buy government bonds “on whatever scale is necessary” to ensure that trading remains orderly.

> TL:DR: No one is willing to loan money to the US gub-mint, via treasuries, to finance US gub-mint deficit spending

Can the British government avert a financial crisis? | Counting the Cost
Oct 1, 2022
https://www.youtube.com/watch?v=xwp9mRixTAk

The British prime minister is betting big on a fiscal policy that includes the biggest tax cuts in the United Kingdom in half a century - funded by borrowing.

On Wednesday, September 28, 2022 at 1:53:56 PM UTC-4, chromebook test wrote:

> The Bank of England moved Wednesday to quell a financial market revolt, announcing that it would temporarily buy an unlimited amount of government bonds to prevent disorderly trading from destabilizing the British economy.

> https://youtu.be/ll1iyllPqT0?t=74

‘The Fed is breaking things’ – Here’s what has Wall Street on edge as risks rise around the world
OCT 1 2022 Hugh Son
https://www.cnbc.com/2022/10/01/the-fed-is-breaking-things-heres-what-has-wall-street-on-edge-as-risks-rise-around-the-world.html

Markets entered a perilous new phase in the past week, one in which statistically unusual moves across asset classes are becoming commonplace.

Surging volatility in what are supposed to be among the safest fixed income instruments in the world could disrupt the financial system’s plumbing, according to Mark Connors, former Credit Suisse global head of risk advisory.

That could force the Fed to prop up the Treasury market, he said. Doing so will likely force the Fed to put a halt to its quantitative tightening program ahead of schedule.

The other worry is that the whipsawing markets will expose the weak hands among asset managers, hedge funds and other players who may have been overleveraged or took on unwise risks. Margin calls and forced liquidations could further roil markets.

On Saturday, October 1, 2022 at 11:25:14 AM UTC-4, chromebook test wrote:
> On Wednesday, September 28, 2022 at 1:53:56 PM UTC-4, chromebook test wrote:
> > The Bank of England moved Wednesday to quell a financial market revolt, announcing that it would temporarily buy an unlimited amount of government bonds to prevent disorderly trading from destabilizing the British economy..
> > https://youtu.be/ll1iyllPqT0?t=74

> ‘The Fed is breaking things’ – Here’s what has Wall Street on edge as risks rise around the world
> OCT 1 2022 Hugh Son
> https://www.cnbc.com/2022/10/01/the-fed-is-breaking-things-heres-what-has-wall-street-on-edge-as-risks-rise-around-the-world.html

Repo fears
There are two broad categories of concern right now: Surging volatility in what are supposed to be the safest fixed income instruments in the world could disrupt the financial system’s plumbing, according to Mark Connors, the former Credit Suisse global head of risk advisory who joined Canadian digital assets firm 3iQ in May.

Since Treasurys are backed by the full faith and credit of the U.S. government and are used as collateral in overnight funding markets, their decline in price and resulting higher yields could gum up the smooth functioning of those markets, he said.

Problems in the repo market occurred most recently in September 2019, when the Fed was forced to inject billions of dollars to calm down the repo market, an essential short-term funding mechanism for banks, corporations and governments.

“The Fed may have to stabilize the price of Treasurys here; we’re getting close,” said Connors, a market participant for more than 30 years. “What’s happening may require them to step in and provide emergency funding.”

Doing so will likely force the Fed to put a halt to its quantitative tightening program ahead of schedule

---------------

https://www.youtube.com/watch?v=HZjZbJuhPAo