Pressure on gilts - UK government bonds - eased on Thursday as the Bank of England sought to steady market sentiment by increasing its bond-buying activity.
This increases the yield - the rate of interest - or cost of borrowing - as investors seek to protect their money.What is a bond buying scheme?The scheme launched by the Bank of England was designed to restore confidence in the government's finances - increasing bond prices and decreasing the yields it has to pay on them.But on Wednesday, yields had surged as high as 5.1%, the same level they reached before the Bank's initial intervention.
As part of the programme, the Bank bought around £4.35bn of bonds on Wednesday and £4.7bn on Thursday in an increased effort to help soothe the markets.Ultimately, it has helped to prop up pension funds at a time when they were already under a lot of strain from global financial pressures.Another government U-turn expected
Chancellor Kwasi Kwarteng and Prime Minister Liz Truss are now under pressure to reinstate a planned increase in corporation tax from April. On Thursday night, the chancellor announced he would be returning to the UK from the US earlier than planned, amid growing expectation of a government U-turn on corporation tax.
The widely anticipated move appeared to reassure the finance industry, after Bank of England Governor Andrew Bailey spooked the markets by insisting that the emergency support would not be extended.
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