Yet more action in the UK gilt market

The BoE emergency intervention policy that started on the 28th September following a fire-sale in long dated gilts from pension funds (trying to raise collateral to satisfy margins calls), will come to an end on Friday as planned. Monday and Tuesday’s additional interventions, firstly extending the maximum purchases from £5bn to £10bn per day, and then allowing the sale of inflation-linked gilts in addition, did little to contain volatility. So far the bank has only bought a small proportion of the potential £65bn, proving they will not buy bonds at any price. 30-year yields once again reached almost 5% on Tuesday, whilst pension funds now appear to be forced sellers of credit to raise collateral. But forced selling would also drive these prices down further. Are we at a tipping point where only a fiscal intervention would change market dynamics?