The Bank of England intervened to calm markets after some types of pension funds were on the verge of failing.<\/p>\n\n\n\n
It promised to buy \u00a365 billion in government bonds after Friday’s mini-budget shook financial markets and caused the pound to fall.<\/p>\n\n\n\n
Investors demanded a much higher return on government bonds, causing some to lose half their value.<\/p>\n\n\n\n
Pension funds, which invest in bonds, were forced to begin selling, raising concerns about a new market downturn.<\/p>\n\n\n\n
Concerns about “a material risk to UK financial stability” prompted the Bank to purchase government bonds at an “urgent pace.”<\/p>\n\n\n\n
The government borrows money to fund its spending plans by selling bonds, or “gilts,” on international markets to investors such as pension funds and large banks.<\/p>\n\n\n\n
However, as those bonds fell, some pension funds were forced to sell gilts and assets, further lowering the price.<\/p>\n\n\n\n
If that process had continued, there was a chance that those pension funds would have been unable to pay their debts.<\/p>\n\n\n\n
To prevent this, the Bank announced Wednesday that it would purchase approximately \u00a365 billion in gilts.<\/p>\n\n\n\n
Joe Dabrowski, deputy director of industry group the Pensions and Lifetime Savings Association, said: “While this is a complex situation as there has been a lot of volatility in the gilt markets in recent days, we would not expect any significant issues for savers.”<\/p>\n\n","protected":false},"excerpt":{"rendered":"
The Bank of England intervened to calm markets after some types of pension funds were on the verge of failing. It promised to buy \u00a365 billion in government bonds after … <\/p>\n