In a series of market speculations, the Bank of England said on Wednesday that its bond purchase plan to support British pension funds will end on time on Friday, which has been "absolutely clear" in its contact with commercial banks. The yield of medium and long-term British government bonds soared once, and the exchange rate of the pound rose 1% after the earthquake. The market is paying attention to the Bank of England's follow-up plan. With the unexpected cooling of the British economy in August, the recession cloud has brought a major test to the British government's budget plan and the Bank of England's anti-inflation target.

Bond purchases and bailouts will end as planned.

On Wednesday (local time 10, 12), the Bank of England reiterated that its bond purchase plan to support British pension funds will end on time on Friday. "As the Bank of England made it clear from the beginning, its temporary and directional purchase of British government bonds will end in June 65438+1October 65438+April." A spokesman for the Bank of England said, "Bailey confirmed this position yesterday and made it clear in his contact with the top management of the bank. After 10 and 14, some measures including the new deferred collateral repurchase mechanism (TECRF) will be put in place to ease the liquidity pressure of LDI. "

The yield of British government bonds rose first and then fell. 10 bonds hit an intraday high of 4.63%, the highest since 2008, and then the increase narrowed to 4.43%. The 20-year British debt once approached 5.20%, the highest since June 2002, and fell back to around 4.90% in late trading. The 30-year British debt once hit the key psychological barrier of 5%, refreshing the high level since the financial crisis, and approaching the late test of 4.80% support.

In order to cope with the impact of the British government's mini-budget plan on the market, the Bank of England announced an emergency plan on the 28th of last month to buy British long-term government bonds with a daily limit of 5 billion pounds, with a term of September 28th to 10/4. JonCunliffe, deputy governor of the Bank of England, wrote in a letter to a member of parliament last week that when the Bank of England stepped in, several pension funds were only a few hours away from collapse.

As the due date approached, the panic returned. On Monday, the yield of 30-year British government bonds once rose to 4.75%, approaching the previous high. Subsequently, the Bank of England announced that it would increase the bond purchase scale for five days this week to a maximum of 654.38+000 billion pounds per day, and included inflation-linked bonds, saying that the financial stability of the UK is facing "significant risks" and there may be a self-reinforcing "selling" state.

However, the Bank of England seems to have no intention of extending the rescue period. AndrewBailey, governor of the Bank of England, told the IIF in Washington on Tuesday local time that British pension funds need to rebalance their positions before Friday, when the central bank's emergency bond purchase plan will end. "My message to the relevant funds and management companies is: There are still three days, and you must finish this work."

This has once again triggered market concerns, and the prices of sterling and British debt have fallen again. Since the British government bonds fell sharply at the end of last month due to the government's tax reduction plan, the country's pension funds have been scrambling to raise cash. Previously, due to the sharp drop in bond prices, the fund needed to provide emergency collateral for derivative assets under the debt-driven investment (LDI) strategy, which caused a vicious circle of chain selling and forced the Bank of England to rescue the market at last.

The official statement did not dispel the doubts of the outside world. MichealHewson, chief market analyst of CMCMarkets, said, "Considering that the Bank of England has just warned the market of selling risks, Bailey's tone is particularly confusing. If you really believe that selling is risky, then why set a three-day deadline for the pension fund to sort out your risk? Further fluctuations in the next few days are likely to trigger another major reversal and cause another blow to the credibility of the central bank. "

It is worth noting that earlier on Wednesday, some media reported that Bank of England officials privately told the banking industry that the period of direct bond purchase may be extended. Judging from the recent trend of British financial assets, the impact of the British government's new budget is obviously far from over. SimeonWillis, chief investment officer of XPS, a British pension consulting company, said that there are still signs that some pension funds have been completely sold to seek liquidity, and the performance of real estate funds is also the same, and credit spreads tend to expand.

In a statement, the British Pension and Lifetime Savings Association (PLSA) called on the Bank of England to extend the bond purchase plan to 10 and 3 1, or even longer. "Since the intervention of the central bank, one of the main concerns of pension funds is that the purchase period should not end prematurely. If bond purchases are stopped, additional measures should be taken to manage market fluctuations. "

The recession is back.

For British economy, a new round of challenges is coming. With the beginning of withdrawing from the quantitative easing program, the Bank of England will reduce its holdings of British government bonds from 10 to 3 1. The British government will update the economic forecast and the financing details of the mini-budget plan on June 5438+1October 3 1. 165438+1On October 3, the Bank of England will hold a meeting to discuss interest rates and raise interest rates soon.

Britain is now on the brink of crisis and recession. According to the data released by the National Bureau of Statistics, Britain's GDP decreased by 0.3% in August and 0.3% in the three months to August, which is equivalent to the pre-epidemic level in February 2020.

SophieLundYates, chief stock analyst of HargreavesLansdown, said in the report: "The British economy seems to have officially moved from stagnation to contraction, and investors are waiting for the recession to officially come. Although there is no recession in Britain by traditional measures, today's data has brought us a big step closer to this situation. "

The International Monetary Fund (IMF) warned this week that Britain's economic growth rate may drop sharply in 2023 due to rising prices, rising interest rates and restrained consumer demand. The agency lowered the UK's GDP growth rate to 0.3% next year, which is at the downstream level among developed economies.

Gourinchas, chief economist of the International Monetary Fund (IMF), expressed concern about the tax cuts that the British government did not support, and urged the British Prime Minister LizTruss and the Chancellor of the Exchequer KwasiKwarteng to align the tax cuts with the Bank of England's anti-inflation task. "Mini-budget will only aggravate inflation, and the central bank is trying to tighten monetary policy. If there are financial authorities trying to stimulate aggregate demand at the same time, it is like having a car with two people in front, each trying to drive in different directions. This will not have a good effect. "

HuwPill, chief economist of the Bank of England, predicted on Wednesday that Britain's interest rate policy will undergo a "significant" change next month to match the British government's fiscal plan. In his view, the British government's "growth plan" and its support for the household and enterprise energy bill will increase inflationary pressure in the medium term.

DanieleAntonucci, chief economist and macro strategist of QuintetPrivateBank, believes that the central bank can only do so much to appease the currency and bond markets, because the driving force of market volatility is fiscal policy, not the Bank of England. "Fiscal policy has led to market instability, including the pension sector and the mortgage market. The Bank of England is striving to fulfill its mission of financial stability. I suspect that the market will be volatile in the next few weeks. The next catalyst is basically the comprehensive budget of the British government and the OBR economic forecast. "