The Bank of England’s misstep may be an opportunity for bond buyers, explains jonsindreu WSJWhatsNow
The Bank of England has become the latest central bank to shoot itself in the foot. It may be an opportunity for bond buyers.
Turmoil in the U.K. bond market created a feedback loop that left investors like pension funds short on cash and rippled out into other markets. WSJ’s Chelsey Dulaney explains the type of investment at the heart of the crisis. Illustration: Ryan TrefesSeeing central banks break things for appearances’ sake is disquieting. It could also be a sign that parts of the bond market can’t get much worse.
Late Tuesday, Bank of England Gov. Andrew Bailey warned pension funds that they had “three days left” to sort out liquidity problems, leading sterling to drop 1% against the euro. Selling appetite fizzled somewhat as Wednesday trading started after the Financial Times wrote that the BOE privately told bankers that purchases could be prolonged. Long-term gilts still came under pressure, especially after the central bank denied the report.
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