UK government borrowing costs have hit a 20-year high after the Bank of England confirmed its emergency bond-buying programme will end on Friday as planned.
On Wednesday morning, it said all temporary and targeted purchases of UK government bonds, known as gilts, would stop.
This has been the position throughout and has been “made absolutely clear in contact with the banks at senior levels”, the Bank said in a statement.
However, the clarification of its position did little to soothe investor nerves, with a sell-off taking 20 and 30-year gilt yields – the rate demanded to hold government debt – to their highest level since 2002.
Both exceeded 5.1% earlier on Wednesday.
The emergency 13-day bond buying programme was started to avoid “dysfunction” in the pension market which took hold amid bond market unease over UK borrowing requirements following the government’s mini-budget.
The programme is aimed at tackling the consequences of rising interest rates on government bonds, which increased the cost of holding the bonds and resulted in pension funds facing a liquidity crunch.
There had earlier been suggestions that the Bank could backtrack, however, and extend the bond-buying beyond Friday’s cut-off.
The Financial Times said the Bank had been privately telling those working in pension funds that it could be extended.
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This came despite the governor, Andrew Bailey, firmly stating pension funds had “three days left… to get this done” at an event in Washington on Tuesday evening.
In its statement on Wednesday, the Bank reaffirmed it would continue to support the pension markets in other ways beyond Friday.
This would be done via the Bank’s temporary yet open-ended measure to help lenders facing liquidity issues who work with the corner of the pensions market that had experienced difficulties. The measure wasannounced on Monday.
The Financial Times report said those involved in derivatives needed more time to avoid the forced selling that led to the Bank’s intervention on 28 September.
It was revealed later in the day that the Bank accepted £1.9bn worth of offers in its daily index-linked bond buy-back operation.
It also accepted all £2.3754bn of long-dated conventional gilts which it was offered – the highest sum since the scheme began on 28 September but well below the £5bn it would have been prepared to buy.
The pound clawed back some of the losses versus the dollar incurred on Tuesday after Mr Bailey’s refusal to extend the bond-buying support beyond Friday, trading just shy of $1.11.
30-year bond yields were hovering just below their level before the Bank’s first intervention – at 4.9% – after striking the 20-year high earlier in the day.
The thinking behind the emergency bond-buying has been questioned by the Treasury Committee of MPs.
The chair of the Treasury Committee, Mel Stride, wrote to the deputy governor at the Bank on Wednesday and asked for an update on the emergency interventions, querying what further action will be required by the Bank to prevent risks to financial stability.
Mr Stride also asked how the Bank decided to expand its emergency intervention on Monday, to launch new liquidity support to lenders and start buying index linked gilts (with interest rates in line with inflation). He questioned why these interventions were not part of the original intervention announced on 28 September.
The Bank signalled it is ready to increase interest rates again in November as it fights to bring inflation down to 2%. Most recent figures show inflation was at 9.9%.
Once again the Bank’s chief economist, Huw Pill, said interest rates likely need to rise.
“At present, I am still inclined to believe that a significant monetary policy response will be required to the significant macro and market news of the past few weeks.”
The Bank’s monthly financial policy summary was released on Wednesday and warned UK households will become more vulnerable to financial shocks.
“Rises in the cost of living and interest rates will increase pressure on UK household finances and make households more vulnerable to shocks,” the Bank’s Financial Policy Summary and Record said.
Further warnings on the economic health of businesses were issued: “For businesses, higher costs, lower household demand and rising interest rates will reduce earnings. Some may find it harder to repay debts.”
Households may be less impacted by rising interest rates due to being on fixed-term repayment plans and having less debt, the Bank said. Accordingly there is a reduced risk of defaulting on repayments.
“People have less debt (relative to their incomes) and the share of high loan-to-value mortgages is much lower than before the global financial crisis. This reduces the risk of them defaulting on debt and banks are now required to be flexible in their response,” the report said.
The banks are in a better position than the financial crash too and are able to help households should they fall into financial difficulty, the Bank concluded.
“The UK banking sector is substantially more resilient than before the global financial crisis, with significantly higher levels of capital and liquidity. They can continue to support households and businesses even if economic conditions get worse.”
Donald Trump and a leading figure in the Israeli army have suggested a ceasefire in Gaza could be close.
Eyal Zamir, chief of staff of the Israel Defence Forces (IDF), told Israeli media that “conditions were created to advance a deal” to bring about an end to the conflict in the coastal territory, and the release of hostages.
In a televised address, he said: “We have achieved many significant results, we have caused great damage to the governance and military capabilities of Hamas.
“Thanks to the operational power that we have demonstrated, the conditions have been created to advance a deal to release the hostages.”
‘This week, or next’
It comes as the US president hosts Israeli Prime Minister Benjamin Netanyahu in Washington DC on a prolonged visit this week.
Mr Trump said his meetings with Mr Netanyahu were focused “on Gaza for the most part”.
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He said: “I think we have a chance [of a ceasefire] this week, or next week.”
However, the US leader added: “Not definitely,” saying nothing was certain about the situation in Gaza.
Image: Donald Trump speaks, as Pete Hegseth looks on, during a dinner with Israeli Prime Minister Benjamin Netanyahu.
Pic: Reuters
Image: Benjamin Netanyahu speaks during a bilateral dinner with Donald Trump this week.
Pic: Reuters
Hamas reiterates ‘keenness’ to end fighting
Meanwhile, Hamas has repeated its message that it is committed to the negotiations but warned of a number of sticking points despite the positive noises from senior Israeli figures.
In a statement, the militant group said: “In its keenness to succeed in the ongoing efforts, the movement [Hamas] has shown the necessary flexibility and agreed to release 10 prisoners.
“The key points remain under negotiation, foremost among them: the flow of aid, the withdrawal of the occupation from the territories of the Gaza Strip, and the provision of real guarantees for a permanent ceasefire.”
Mr Trump’s special envoy to the Middle East Steve Witkoff previously told a cabinet meeting that the anticipated ceasefire would last 60 days and involve the release of ten hostages and nine bodies.
A source close to the negotiations told Sky News that the hostage release would take place in two waves during the 60 days and was conditional on the ceasefire.
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While the politicians talk, so many people come from around the world to try to get across the Channel on small boats. But why?
Why make such a perilous crossing to try to get to a country that seems to be getting increasingly hostile to asylum seekers?
As the British and French leaders meet, with small boats at the forefront of their agenda, we came to northern France to get some answers.
It is not a new question, but it is peppered with fresh relevance.
Over the course of a morning spent around a migrant camp in Dunkirk, we meet migrantsfrom Gaza, Iraq, Eritrea, South Sudan, Sri Lanka and beyond.
Some are fearful, waving us away; some are happy to talk. Very few are comfortable to be filmed.
All but one man – who says he’s come to the wrong place and actually wants to claim asylum in Paris – are intent on reaching Britain.
They see the calm seas, feel the light winds – perfect conditions for small boat crossings.
John has come here from South Sudan. He tells me he’s now 18 years old. He left his war-torn home nation just before his 16th birthday. He feels that reaching Britain is his destiny.
“England is my dream country,” he says. “It has been my dream since I was at school. It’s the country that colonised us and when I get there, I will feel like I am home.
“In England, they can give me an opportunity to succeed or to do whatever I need to do in my life. I feel like I am an English child, who was born in Africa.”
Image: ‘England is my dream country,’ John tells Adam Parsons
He says he would like to make a career in England, either as a journalist or in human resources, and, like many others we meet, is at pains to insist he will work hard.
The boat crossing is waved away as little more than an inconvenience – a trifle compared with the previous hardships of his journey towards Britain.
We meet a group of men who have all travelled from Gaza, intent on starting new lives in Britain and then bringing their families over to join them.
One man, who left Gaza two years ago, tells me that his son has since been shot in the leg “but there is no hospital for him to go to”.
Next to him, a man called Abdullah says he entered Europe through Greece and stayed there for months on end, but was told the Greek authorities would never allow him to bring over his family.
Britain, he thinks, will be more accommodating. “Gaza is being destroyed – we need help,” he says.
Image: Abdullah says ‘Gaza is being destroyed – we need help’
A man from Eritreatells us he is escaping a failing country and has friends in Britain – he plans to become a bicycle courier in either London or Manchester.
He can’t stay in France, he says, because he doesn’t speak French. The English language is presented as a huge draw for many of the people we talk to, just as it had been during similar conversations over the course of many years.
I ask many of these people why they don’t want to stay in France, or another safe European country.
Some repeat that they cannot speak the language and feel ostracised. Another says that he tried, and failed, to get a residency permit in both France and Belgium.
But this is also, clearly, a flawed survey. Last year, five times as many people sought asylum in France as in Britain.
And French critics have long insisted that Britain, a country without a European-style ID card system, makes itself attractive to migrants who can “disappear”.
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1:48
Migrant Channel crossings hit new record
A young man from Iraq, with absolutely perfect English, comes for a chat. He oozes confidence and a certain amount of mischief.
It has taken him only seven days to get from Iraq to Dunkirk; when I ask how he has made the trip so quickly, he shrugs. “Money talks”.
He looks around him. “Let me tell you – all of these people you see around you will be getting to Britain and the first job they get will be in the black market, so they won’t be paying any tax.
“Back in the day in Britain, they used to welcome immigrants very well, but these days I don’t think they want to, because there’s too many of them coming by boat. Every day it’s about seven or 800 people. That’s too many people.”
“But,” I ask, “if those people are a problem – then what makes you different? Aren’t you a problem too?”
He shakes his head emphatically. “I know that I’m a very good guy. And I won’t be a problem. I’ll only stay in Britain for a few years and then I’ll leave again.”
A man from Sri Lanka says he “will feel safe” when he gets to Britain; a tall, smiling man from Ethiopia echoes the sentiment: “We are not safe in our home country so we have come all this way,” he says. “We want to work, to be part of Britain.”
Emmanuel is another from South Sudan – thoughtful and eloquent. He left his country five years ago – “at the start of COVID” – and has not seen his children in all that time. His aim is to start a new life in Britain, and then to bring his family to join him.
He is a trained electrical engineer, but says he could also work as a lorry driver. He is adamant that Britain has a responsibility to the people of its former colony.
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US President Donald Trump is putting “heavy” pressure on Israeli Prime Minister Benjamin Netanyahu to end the war in Gaza, two sources close to the ceasefire negotiations have told Sky News.
One US source said: “The US pressure on Israel has begun, and tonight it will be heavy.”
A second Middle Eastern diplomatic source agreed that the American pressure on Israel would be intense.
Image: Benjamin Netanyahu gave Donald Trump a letter saying he had nominated him for a Nobel Peace Prize. Pic: AP
Netanyahu arrived in Washington DC in the early hours of Monday morning and held meetings on Monday with Steve Witkoff, Trump’s Middle East envoy, and Marco Rubio, the secretary of state and national security adviser.
The Israeli prime minister plans to be in Washington until Thursday with meetings on Capitol Hill on Tuesday.
Trump has made clear his desire to bring the Gaza conflict to an end.
However, he has never articulated how a lasting peace, which would satisfy both the Israelis and Palestinians, could be achieved.
His varying comments about ownership of Gaza, moving Palestinians out of the territory and permanent resettlement, have presented a confusing policy.
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2:36
‘Israel has shifted towards economy of genocide’
Situation for Palestinians worse than ever
Over the coming days, we will see the extent to which Trump demands that Netanyahu accepts the current Gaza ceasefire deal, even if it falls short of Israel’s war aims – the elimination of Hamas.
The strategic objective to permanently remove Hamas seems always to have been impossible. Hamas as an entity was the extreme consequence of the Israeli occupation.
The Palestinians’ challenge has not gone away, and the situation for Palestinians now is worse than it has ever been in Gaza and also the West Bank. It is not clear how Trump plans to square that circle.
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5:13
‘Some Israeli commanders can decide to do war crimes’
Trump’s oft-repeated desire to “stop the killing” is sincere. Those close to him often emphasise this. He is also looking to cement his legacy as a peacemaker. He genuinely craves the Nobel Peace Prize.
In this context, the complexities of conflicts – in Ukraine or Gaza – are often of secondary importance to the president.
If Netanyahu can be persuaded to end the war, what would he need?
The hostages back – for sure. That would require agreement from Hamas. They would only agree to this if they have guarantees on Gaza’s future and their own future. More circles to square.
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17:44
Trump 100: We answer your questions
Was White House dinner a key moment?
The Monday night dinner could have been a key moment for the Middle East. Two powerful men in the Blue Room of the White House, deciding the direction of the region.
Will it be seen as the moment the region was remoulded? But to whose benefit?
Trump is a dealmaker with an eye on the prize. But Netanyahu is a political master; they don’t call him “the magician” for nothing.
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Trump makes decisions instinctively. He can shift position quickly and often listens to the last person in the room. Right now – that person is Netanyahu.
Gaza is one part of a jigsaw of challenges, which could become opportunities.
Diplomatic normalisation between Israel and the Arab world is a prize for Trump and could genuinely secure him the Nobel Peace Prize.
But without the Gaza piece, the jigsaw is incomplete.