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The Bank of England has launched a temporary bond-buying programme as it takes emergency action to prevent “material risk” to UK financial stability.

It revealed that it would buy as many long-dated government bonds as needed between now and 14th October in a bid to stabilise financial markets in the wake of the mayhem that followed the government’s mini-budget last Friday.

In addition to the plunge in the value of the pound, it has also seen investors demand a greater rate of return for UK government bonds – essentially IOUs.

That is because the level of borrowing required to fund the government giveaway, including tax cuts and energy aid for households and businesses, shocked the market which immediately questioned the sustainability of the public finances.

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What this action is aimed at doing is tackling consequences of rising yields, in this instance a liquidity crunch facing pension funds.

WHY THE BANK OF ENGLAND HAS ACTED


 Ian King

Ian King

Business presenter

@iankingsky

There are some very, very specific reasons why the Bank of England is intervening in this particular asset class in long-dated gilts – that’s gilts of a 20 to 30 year duration.

It affects traditional pension funds where a retiree is guaranteed a certain payout at their retirement based on their final salary when they retire.

Now, a lot of these funds use long-dated gilts as part of their investments and what has been happening over recent days is a lot of the investment funds have been asking pension funds to post more collateral – to put up cash.

It has been reported in The Times that actually these cash calls have been running into tens of billions of pounds since the beginning of the week because of this spike in long-dated gilt yields.

That is why the Bank of England is specifically targeting that with this gilt intervention.

It is aimed at seeing off a crisis that’s potentially starting to emerge in pension funds.

The Bank said in a statement: “Were dysfunction in this (long-dated bond) market to continue or worsen, there would be a material risk to UK financial stability.

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“This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.”

The programme marked the Bank’s first policy intervention as it battles to bring down inflation and ease the cost of living crisis. Its chief economist signalled on Tuesday that a “significant” rise in Bank rate was also likely ahead.

The government’s growth plan is only seen as adding inflationary pressure to the economy, leaving it at loggerheads with the Bank’s mandate.

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‘Crisis’ already for Truss government

The Bank said the bond purchases, which would be fully covered by the Treasury in the event of any losses, would be sold back once market conditions had stabilised.

The announcement certainly had an immediate effect on the market.

Data showed that 30-year bond yields fell back to 4.3%, having risen to levels above 5% not seen since 2022 earlier in the day. There were similar falls for 20-year yields.

Those for ten-year bonds also fell back below 4% from 4.6%.

Stock markets, which had endured widespread falls Europe-wide amid recession fears, erased some of their losses.

The FTSE 100 had ben almost 2% down but was just 0.8% lower on the day just before 1pm.

The pound, however, was a cent and a half down versus the dollar to stand at $1.0578 and a cent lower against the euro.

The single European currency was also suffering against a resurgent US currency.

In addition to its bond-buying action, the Bank said it would postpone the start of its efforts to unwind the sale of bonds it acquired through financial crisis and COVID crisis era quantitative easing.

The Bank had planned to reduce its £838bn of gilt holdings by £80bn over the next year.

Neil Wilson, chief markets analyst at Markets.com, said the Bank’s move followed evidence of “severe liquidity stress”.

This would have been particularly evident for pension funds who have faced demands for additional cash to cover off rising yields.

“The question is whether (this Bank action) acts to stabilise longer-term or if the market retests the Bank’s resolve”, he wrote.

“We’re now seeing the Bank go toe-to-toe with the market and this might not lead to any decrease in volatility”, he warned.

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Two men charged with spying for China granted bail

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Two men charged with spying for China granted bail

Two men have been granted conditional bail after being charged with spying for China.

Former parliamentary researcher Christopher Cash and co-defendant Christopher Berry were charged under the Official Secrets Act after a counterterrorism investigation.

The men appeared at Westminster Magistrates’ Court on Friday but were not required to enter any pleas to the charge.

It is alleged that between January 2022 and February 2023, Cash obtained, recorded and published information “for a purpose prejudicial to the safety or interests of the state” and which could be “directly or indirectly, useful to an enemy”.

Berry is accused of the same offence between December 2021 and February 2023.

Chief Magistrate Paul Goldspring granted both men conditional bail, which in Cash’s case included not contacting MPs or any other staff of parliamentarians and not entering the parliamentary estate.

Cash was told he was permitted to contact his local MP on constituency matters.

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He and Berry were also told not to travel outside the UK and not to contact each other. They were also ordered to sign on at a police station.

China has dismissed the charges as “self-staged political farce”.

Cash previously worked as a parliamentary researcher and was closely linked to senior Tories including Tom Tugendhat, now security minister, and Alicia Kearns, who serves as chair of the Commons Foreign Affairs Committee.

He was director of the China Research Group, which was initially chaired by Mr Tugendhat and then Ms Kearns.

Commons Speaker Sir Lindsay Hoyle previously told MPs two people had been charged on a matter “relating to national security”, one of whom was a parliamentary pass holder.

Both defendants will appear at the Old Bailey for a preliminary hearing on 10 May.

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Channel migrant dinghy in which five people died packed with people carrying weapons and fighting – survivor

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Channel migrant dinghy in which five people died packed with people carrying weapons and fighting - survivor

The migrant dinghy in which five people died was chaotic, overloaded and packed with people carrying weapons and fighting, according to one of the passengers who was on board, speaking exclusively to Sky News.

Heivin, 18, confirmed the boat was stormed by a rival group of migrants, armed with sticks and knives, as it was preparing to set off.

She said: “People were fighting, people were getting stepped on, they were dying and being thrown off.”

She said she fell into the water but was pulled out by another person on the boat. Two other passengers who fell into the water, including a young girl, drowned. Three other people died on the boat.

Heivin said she “really hated” the group of people who hijacked their boat, insisting they should take the blame for what happened.

“They caused a huge tragedy,” she said.

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Five die after migrant boat ‘hijacked’

“It was because of them that people died.

“If they hadn’t come and started fighting, none of this would have happened.”

Read more:
Arrests after deaths of five people who tried to cross Channel
Migrants explain why they won’t be deterred by Rwanda bill

The tragedy happened in the early hours of Tuesday morning in the waters off the French coastal town of Wimereux.

The boat, which launched with 112 people on board, stopped on a sandbar only a few hundred metres from the shore.

By the time emergency services arrived, it was clear people had died, both on the boat and in the water.

Two men have been charged with immigration offences in connection with the investigation into the deaths of the five migrants.

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French authorities struggle to intercept all small boats carrying migrants across the Channel.

“I fell into the water but a man helped me up,” Heivin said.

“Everyone was climbing aboard and there were too many people – over 110 of us.

“I had tried to be at the front, but after I fell in the water I sat on the edge of the boat and didn’t go towards the other end – that’s where people were fighting.

“I thank God that I didn’t get into the top part of the dinghy. I would have suffocated. I thank God for that every day.”

Men in blue on Channel Crossing
Image:
These men rushed on to the boat

She said her group, comprising between 50 and 60 people, had arrived at the beach in Wimereux after following the instructions of the people smugglers who had taken their money in exchange for arranging a passage to Britain.

Hidden away, they had waited for the smugglers to prepare the dinghy. She then saw police officers and was told simply to run towards the water.

At that point, the rival group emerged as well, clambering into the boat along with the people who had paid the smugglers.

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Heivin said she saw migrants from this group carrying sticks and knives, squaring up to both the police and the original passengers.

When the boat set off, exceptionally overladen, it meandered towards the Channel, but there was still fighting and it is clear that some people were being crushed.

“I was aware there was a fight,” Heivin said.

“They were shouting that people were stuck underneath other people, that they couldn’t get out, that some were falling under people’s feet.”

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Heivin has spent seven months travelling across Europe since leaving Iraq. She said she wanted to get to Britain because “it is a better country for me, definitely in terms of the language but also, in many other other ways, it is better than the rest of Europe”.

She’s made 30 attempts to cross the Channel, but has failed each time. Sometimes it has been the French police who have destroyed boats while other times the boat on which she was travelling broke down. One time, the boat failed only an hour from British waters.

She is undeterred by the trauma that she underwent, however, and she intends to try again to reach Britain as soon as possible. “Perhaps this weekend,” she said.

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School in South Wales locked down after pupil receives threatening messages

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School in South Wales locked down after pupil receives threatening messages

A school in South Wales was locked down after a teenage pupil allegedly received threatening messages.

Gwent Police said Ebbw Fawr Learning Community in Ebbw Vale, Blaenau Gwent, was placed into lockdown at around 10.20am on Friday.

The force confirmed that police officers had attended the school, where they remained to provide reassurance.

A police spokeswoman said: “We have arrested a teenage boy on suspicion of making threats.

“The arrest did not take place on school premises and was not in the Ebbw Vale area.

“Our inquiries are ongoing.”

The incident comes after two teachers and a pupil sustained stab wounds at Ysgol Dyffryn Aman in Ammanford, Carmarthenshire, on Wednesday.

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