BOE Spokesperson Says Bond-Buying Program Still to End Friday

Tom Metcalf, Bloomberg News

Commuters outside the Bank of England in London, UK, on Wednesday, Sept. 21, 2022. The Bank of England on Thursday is set to raise interest rates and start selling assets built up during a decade-long stimulus program, a historic tightening of monetary policy designed to clamp down on inflation. Photographer: Jose Sarmento Matos/Bloomberg , Bloomberg

(Bloomberg) -- The Bank of England refuted a report that it could extend the deadline on its emergency bond-buying program, confirming Governor Andrew Bailey’s message that the central bank will end it on Friday.

“As the Bank has made clear from the outset, its temporary and targeted purchases of gilts will end on 14 October,” a spokesperson said in an emailed statement. “The Governor confirmed this position yesterday, and it has been made absolutely clear in contact with the banks at senior levels.”

Bailey said Tuesday that fund managers have to cut vulnerable positions before the support ends, as he looks to enforce market discipline despite traders and asset managers pricing in longer term support.

“My message to the funds involved and all the firms is you’ve got three days left now,” Bailey said at the Institute of International Finance annual meeting in Washington. “You’ve got to get this done.”

Read More: Bailey’s Credibility on the Line Amid Pension Deadline Confusion

The Financial Times reported Wednesday that the BOE had informed some lenders the previous day that it was prepared to extend the facility past the deadline. Those talks, the paper said, took place before Bailey insisted on the deadline in a speech on Tuesday.

The BOE started buying long-dated bonds late last month as an emergency measure to ensure pension funds exposed to so-called liability-driven investment strategies could clear their positions, after the British government triggered a market rout by announcing £45 billion ($50 billion) of unfunded tax cuts. The plan was always due to expire at the end of this week and Bailey signaled he wants to stick to that timetable.

The strict deadline puts investors worldwide on notice that some of the pension funds managing £1.8 trillion ($2 trillion) in defined-benefit schemes may again cause turmoil in the gilt market.

The Wednesday statement also noted that beyond Oct. 14, a number of facilities “are in place to ease liquidity pressures on LDIs.” Those include a Temporary Expanded Collateral Repo Facility, or TECRF, that will run until Nov. 10. Its purpose is to enable banks to ease pressures in LDI funds through liquidity insurance operations.

Read More: Bailey Triggers Pound Selloff With Pledge to End BOE Support

(Updates with Bank of England comment.)