The Bank of England said Wednesday it would buy UK government debt “on whatever scale is necessary” in an effort to restore order to the market.
The BoE said it would temporarily buy long-dated bonds in light of a surge in 30-year UK bond yields above 5%, their highest since 2002.
Investors have been dumping the pound and U.K. bonds since the government of new Prime Minister Liz Truss on Friday unveiled a package of tax cuts aimed at getting the economy moving and providing some relief for households and businesses amid high energy bills coming this winter
“Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy,” the central bank said in its statement.
Before fears of more inflation coming, markets fear the BoE will push interest rates as high as 6% next spring, from 2.25% at present.
Sterling hit record lows against the dollar on Monday.
The International Monetary Fund and ratings agency Moody’s criticized Britain’s new economic strategy, which has sparked a collapse in the value of British assets.