MercoPress. South Atlantic News Agency

Bank of England to the rescue, “to restore orderly market conditions”

The bank said it would spend up to 5 billion pounds (€5.7 billion, US$5.5 billion) per day on inflation-linked government debt bonds

The Bank of England unveiled further measures to calm market turmoil triggered by the UK mini budget announcement. The bank said it would spend up to 5 billion pounds (€5.7 billion, US$5.5 billion) per day on inflation-linked government debt bonds, or gilts, to further prop up Britain's £2.1-trillion bond market.

The Bank of England said its latest action would “act as a further backstop to restore orderly market conditions.”

Its statement noted that “the beginning of this week has seen a further significant re-pricing of UK government debt, particularly index-linked gilts.”

The central bank said it would now purchase such gilts under its wider operation to prevent the market from descending into a death spiral.

“Dysfunction in this market and the prospect of self-reinforcing 'fire sale' dynamics pose a material risk to UK financial stability,” it added.

The move is the latest effort to reassure investors, including pension funds, that have lent money to the UK government.

The UK's finance minister, Kwasi Kwarteng, in September announced tax cuts — twinned with heavy borrowing — that spooked markets.

That announcement sent interest that the government would have to pay on borrowing soaring, while the pound plummeted to a record low.

The Bank of England feared a rapid sale of government bonds by investors. It began an emergency purchase scheme at the end of September to stave off a market death spiral.

A further slump in the bond market on Monday had already been met with action from the bank, which doubled the amount of debt it said it would buy back.

Meanwhile, Kwarteng, who has partly rowed back his tax cut policy, moved to address the root of market unrest over unfunded borrowing. He said he would publish his medium-term fiscal plan alongside the forecasts on October 31 rather than late November.