Pound suffers as Bank of England governor rules out extension to bond-buying aid for pension funds
The Bank of England’s governor has ruled out extending its bond-buying support for pension funds beyond Friday’s deadline, prompting a dramatic fall in the value of the pound.
Andrew Bailey told an event in Washington that funds had “three days left… to get this done” after a series of interventions to support the “dysfunctional” market in the wake of the wider meltdown over the government’s mini-budget.
The latest action, on Tuesday, saw the Bank snap up index-linked gilts, government bonds with interest payments in line with inflation.
They are heavily used by pension funds.
The Bank had already been buying up long-dated gilts – a type of government bond that make up a large proportion of pension pots – to steady market jitters.
They saw yields – the rate demanded to hold government debt – shoot up as pension schemes tried to raise hundreds of billions through firesales of government and corporate bonds to meet cash calls – the latest coming from providers of so-called liability-driven investment strategies.
They are demanding funds put up more money to support new and older hedging positions.
Mr Bailey told an event organised by the Institute of International Finance that the intervention must be temporary.
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“We have announced that we will be out by the end of this week. We think the rebalancing must be done.
“And my message to the funds involved and all the firms involved managing those funds: You’ve got three days left now. You’ve got to get this done.”
Industry body the Pensions and Lifetime Savings Association had earlier urged the Bank to extend the bond-buying programme until 31 October – the new date for the publication of the government’s debt plan – at least.
Mr Bailey’s clear stance on the issue saw the pound, which had been trading higher on the day versus the dollar earlier, sink by more than one and a half cents to below $1.10.
What on earth is happening in UK markets?
This is starting to look a little… unnerving.
The government bond market is – in the UK and elsewhere – best thought of as the bedrock of the financial system.
The government borrows lots of money each year at very long durations and these bonds are bought by all sorts of investors to secure a low but (usually) reliable income over a long period of time.
Compared to other sorts of assets – such as the shares issued by companies or for that matter cryptocurrencies – government bonds are boring. Or at least, they’re supposed to be boring.
They don’t move all that much each day and the yield they offer – the interest rate implied by their prices – is typically much lower than most other asset classes.
But recently the UK bond market (we call them gilts as a matter of tradition, short for gilt-edged securities, because in their earliest embodiment they were pieces of paper with golden edges) has been anything but boring.
On Monday the Bank announced a potential doubling of the amount it was willing to spend every day on long-dated gilts.
Gilt yields, the interest rate payable on government bonds, rose on Monday, near the 5% highs of 27 September, the day before the Bank made its first intervention.
They fell when news of the latest operation was announced but long-dated yields later rose higher again.
That took place when the Bank revealed it had bought £1.947bn of index-linked bonds on Tuesday, adding that it had rejected £466.9m of offers to sell to the central bank.
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It also bought up £1.363bn in long-dated bonds – also well below the £5bn possible.
The yield on 30-year bonds rose back to 4.8% for a short time, having been down at 4.4% around lunchtime.
The benchmark 10-year yield remained around the 4.4% level.
“Things seemed calmer again today,” Mr Bailey told the event.
“We will see,” he added.
The Bank announced on 28 September a temporary and emergency buying programme of long-dated gilts that are to be repaid in 20 to 30 years time, in the wake of chancellor Kwasi Kwarteng’s mini-budget announcement.
Read more:
What are bonds, how are they different to gilts and where do they fit in the mini-budget crisis?
Bond buying period due to end on Friday
Market turmoil that stemmed from the mini-budget led to the unprecedented intervention from the regulator to prevent part of the pension market collapsing as the cost of interest on gilts surged.
Russ Mould, investment director at AJ Bell, said of the scheme’s expansion before Mr Bailey’s remarks: “The Bank of England hopes to avoid a crisis in the market by being a willing buyer of bonds from pension funds who are under pressure.
“These pension funds will welcome today’s move, but whether the broader market shares the same enthusiasm remains to be seen.
“The key sticking point is that the support measures are only scheduled to last until Friday.
“Will that be long enough, or will the Bank of England extend the support scheme? Extending it could go one of two ways – the market either applauds the move and breathes a sigh of relief or it gets even more worried, thinking that the extra time suggests the crisis is more severe than originally thought.”
Comedy writer Bill Dare, – who worked on shows including Spitting Image and Dead Ringers – has died after an accident overseas, his agent said.
Described as a “super producer” by his peers, Dare, 64, worked on eight series of hugely popular satire puppet show Spitting Image.
Airing on ITV during the 1980s and 1990s, the show delighted in lampooning public figures including politicians, celebrities and royalty, winning BAFTAs and Emmys. It was rebooted in 2020.
Dare also created Dead Ringers, a comedy impressions show broadcast on BBC Radio 4.
He also produced The Now Show, a satirical take on the news which ran on Radio 4 from 1998 to 2024.
Dare worked on a wide range of comedy shows during his career, including the radio production of The Mary Whitehouse Experience in the late 1980s and early 1990s. He had also written several novels.
In a statement released on Monday, his agent JFL Agency confirmed he died at the weekend.
A spokesperson said: “We are shocked and greatly saddened to have to announce the death of our brilliant client Bill Dare, who died at the weekend following an accident overseas.
“Our thoughts are with his wife Lucy, daughter Rebecca, and with all of Bill’s family and friends who will be devastated by his loss.
“Bill was a truly legendary producer and writer, and his comedy instincts were second to none.”
Oasis depicted on Spitting Image in 1996. Pic: ITV/Shutterstock
Colleagues were quick to pay tribute and reflect on his talent.
Impressionist Jon Culshaw wrote on X: “It’s impossible to express the unreal sense of loss at the passing of the incredible Bill Dare. The wisest comedy alchemist and the dearest, dearest friend. Much love to Lucy and all Bill’s family and friends. We shall all miss him more than we can say.”
David Baddiel posted on the social media platform: “Just heard that the original producer of The Mary Whitehouse Experience on radio, Bill Dare, has died. Bill was an amazing creative force. I owe him much. RIP.”
Former EastEnders actress Tracy-Ann Oberman said she was “devastated” and that her “entire comedy career was down to Bill”.
She wrote: “When I was on the BBC Radio 4 rep company early on in career – I ran into Bill in the corridors – He asked if I was good at accents. I said yes.
“He cast me in a sketch show. I had to do about 15 different accents. We recorded in front of a live audience at Broadcasting House – afterwards Bill said ‘Why have I never met you – you’re going to have a big career’.
“He was incredibly loyal and supportive and really opened a path for me into the R4 comedy world and then TV having come out of the RSC and theatre it was all new. I will always be grateful. Fly high Bill.”
Comedian and writer Mark Steel wrote: “This is so grim. Bill was a compassionate hearty soul with the ability to be beautifully grumpy, a marvellously thoughtful comic mind.
“He’d argue but always listen and you’d always laugh, he made a million shows and wanted them all to matter and would have made a million more.”
Have I Got News for You writer Pete Sinclair said: “I am utterly devastated by Bill’s death. I still can’t believe it. He was a comedy genius. A hugely talented writer as well as a brilliant producer. A close friend and co-writer. I cannot begin to say how much I’ll miss him.”
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Julia McKenzie, comedy commissioner for Radio 4, said: “I am so terribly sorry to hear this tragic news and my thoughts are with Bill’s wife, family and friends.
“Bill has been a huge part of Radio 4 comedy for decades, as a writer and producer, and listeners will have heard his legendary name at the end of many of their favourite shows.
“Bill was a comedy obsessive, and very instinctive about making the funniest choices when it came to writing, directing and editing.
“He cared so much about his work that in the production booth during Dead Ringers you’d see him crouched over the script, utterly focused on the show.
“He was funny and very dry in person, amusingly cynical when he needed to be and always pushed to keep the comedy he made, and particularly satire, spiky.
“I’ve known and worked with him for 18 years and like many I can’t believe he has gone, he will leave a big hole in the comedy world and in our hearts.”
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