I'm interested to know why the BoE came out with an announced time limit to these purchases and not a straight "whatever it takes" (however long it's needed). (I think Daniela Gabor pointed this out on Twitter) could this be the BoE attempting to put pressure on the Treasury/executive to roll-back?
There's clearly really uncomfortable relations between Treasury and BoE right now...
The price action indicated that this was a squeeze of the pension funds. The BoE stepped in, the shorts needed to cover, and the 30Y rallied by 100 basis points. Unless the shorts want to try taking a suicidal run at the BoE, the squeeze is done. The pension funds now have cover to manage their positions.
Strikes me that the BoE has set it up more like an extended somewhat open-ended repo to give the pension funds time to clear up.
Ultimately HMT has s12 and s19 of the Bank of England Act 1998 to fall back upon if the Bank won't play ball. These are the very definition of 'extreme economic circumstances'
I was going by the initial reports of outright purchases. Repos - which are a purchase that gets reversed - would be needed for liquidity management, and probably more important (other than doing the reverse squeeze).
I'm interested to know why the BoE came out with an announced time limit to these purchases and not a straight "whatever it takes" (however long it's needed). (I think Daniela Gabor pointed this out on Twitter) could this be the BoE attempting to put pressure on the Treasury/executive to roll-back?
There's clearly really uncomfortable relations between Treasury and BoE right now...
The price action indicated that this was a squeeze of the pension funds. The BoE stepped in, the shorts needed to cover, and the 30Y rallied by 100 basis points. Unless the shorts want to try taking a suicidal run at the BoE, the squeeze is done. The pension funds now have cover to manage their positions.
Strikes me that the BoE has set it up more like an extended somewhat open-ended repo to give the pension funds time to clear up.
Ultimately HMT has s12 and s19 of the Bank of England Act 1998 to fall back upon if the Bank won't play ball. These are the very definition of 'extreme economic circumstances'
I was going by the initial reports of outright purchases. Repos - which are a purchase that gets reversed - would be needed for liquidity management, and probably more important (other than doing the reverse squeeze).
I'm just doing a bump on my original comment given latest 'proclaimation'.. feel free to update with post :-)