Market News

(Bloomberg) -- UK long bonds headed for their biggest ever rally after the Bank of England said it would carry out temporary purchases of long-dated UK bonds and delay planned sales of debt. 

The yield on 30-year gilts plummeted as much as 65 basis points to 4.34%, the largest drop in data going back to 1996. That erased an earlier decline Wednesday and came after heavy selling in recent sessions fueled by concerns over government’s fiscal spending plans and selling from pension funds facing margin calls. The pound initially surged before falling back to trade 0.4% weaker at $1.0693.

“This is essentially an exercise in short-term yield curve control, so it’s more aimed at the gilt market to create stability in yields,” said Geoffrey Yu, an analyst at Bank of New York Mellon Corp. “If they calm fixed income volatility it can help calm FX as well.”

The BOE said it would step into the market to buy long-dated government bonds starting Wednesday to help restore order to the market. The central bank also said it would postpone the beginning of its quantitative tightening bond sales, due to begin next week.

(Adds analyst comment. A previous version of this story corrected the date in the second paragraph.