British bonds make a dramatic turnaround after falling, Bank of England implements emergency bond purchase of 740 billion yen - Bloomberg

The UK bond market was hit by violent volatility on the 12th. Longer-term British bonds started in negative territory and expanded the decline in the afternoon. Yields on 30-year bonds rose above 5% at one point. Traders sold their bond holdings after a Bank of England spokesman confirmed the end of the bond-buying program as planned.

But hours later, the Bank of England launched its largest emergency bond-buying round since its intervention began last month. It bought all the conventional bonds offered by investors, and the purchase amount reached 4.56 billion pounds (about 740 billion yen). The 30-year bond largely canceled out the temporary decline, and the yield ended at 4.8%, almost unchanged from the previous day.

“Anything can happen in the chaos of British policymaking,” said Kit Jacks, chief FX strategist at Societe Generale.

The day’s turmoil highlights just how unpredictable and chaotic the UK bond market has become since the government’s announcement of a massive tax cut. Margin calls by pension funds have also fueled chaotic trading in British bonds, especially longer term, inflation-linked bonds.

In the foreign exchange market, the pound has rebounded after falling for five consecutive days against the dollar, and is hovering around $1.11 per pound. The FTSE 100 index fell 0.9%.