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The Bank of England on Monday said it has doubled the size of a temporary bond-buying programme, which it kicked off following market turmoil after the UK government's mini-budget announcement last month.
The bank doubled the size of daily auctions to a maximum of £10 billion, from £5 billion before.
Following the announcement of the mini-budget last month, and the turmoil that ensued, the Bank of England decided to buy up long-dated UK government bonds, or gilts.
It affirmed on Monday that the scheme would end this week.
‘To date, the bank has carried out eight daily auctions, offering to buy up to £40 billion, and has made around £5 billion of bond purchases. The bank is prepared to deploy this unused capacity to increase the maximum size of the remaining five auctions above the current level of up to £5 billion in each auction,’ the BoE said.
Under its plan to ‘orderly end’, the bank on Monday said it will launch a temporary expanded collateral repo facility, or TECRF.
It is set up to ease liquidity pressures through liquidity insurance operations, running beyond the end of this week.
‘Under these operations, the bank will accept collateral eligible under the sterling monetary framework, including index linked gilts, and also a wider range of collateral than normally eligible under the SMF, such as corporate bond collateral,’ the bank explained.
Meanwhile, the bank said it will support further easing of liquidity pressures facing liability-driven investment, or LDI, funds, through its regular indexed long term repo operations.
‘This permanent facility will provide additional liquidity to banks against SMF eligible collateral, including index linked gilts, and so support their lending to LDI counterparties,’ it said.
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