The worries surrounding the bond market with the implosion of UK gilts as well as the major rout in Treasuries were a big source of uncertainty for broader markets since the end of last week. The latest BOE announcement, while may have future ramifications, is at least helping to provide some relief for the time being.
UK gilt yields have tumbled lower and that has dragged Treasury yields down as well. 10-year gilt yields are down 13 bps to 4.37% while 10-year Treasury yields are down 7 bps to 3.895% after having briefly clipped above 4% earlier - its highest since 2008. That in turn has seen equities rebound strongly on the day with S&P 500 futures now paring all of its earlier losses:
Essentially, the BOE is stepping in to provide calm to markets and while it is a welcome development, it isn't really a permanent solution. The central bank did say that they will keep this going until mid-October but really it will be until they see that markets are acting less dysfunctional - and that will be subjective. At this point, their plans for QT may very well have to be shelved indefinitely.
Going back to the action to buy bonds, it's not exactly a great time considering the inflation shock being suffered by the UK. However, this is very much the lesser of two evils when compared to Kwarteng's fiscal pursuit.
