The selloff in long-maturity UK bonds picked up speed after the Bank of England damped hopes of more bond buying next week to help restore calm to a fragile market.
The yield on 10-year notes touched 4.64%, the highest since 2008. In 30-year debt, the rate surged above 5%, coming close to levels that just last month presaged the central bank’s intervention to stop the selloff from spiraling out of control.
“Anything is possible in the helter-skelter world of UK policy making,” said Kit Juckes, chief currency strategist at Societe Generale SA.Ever since Chancellor of the Exchequer Kwasi Kwarteng announced a vast package of unfunded tax cuts last month, UK market have been extremely volatile. Collateral calls from leveraged liability-driven investor strategiesdisorderly trading in government bonds, particularly longer-dated and inflation-linked gilts.
Even after Bailey’s firm words, some analysts say they’re sticking to their view that BOE will step in if market conditions don’t improve.“Bailey’s words did sound harsh but from the BOE’s perspective they need to sound stern,” said Pooja Kumra, rates strategist at Toronto-Dominion Bank. “The BOE has been very receptive to markets. If chaos continues we doubt that they will run away.”
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