Why is the Bank of England spending billions?
However, the mini-budget hit confidence in bonds and led to investors demanding a much higher rate of interest for investing in them. Some bonds halved in value.The pension funds also buy a form of insurance to protect the value of their bonds. However, as government borrowing costs increased, the insurance providers demanded payments - forcing the funds to sell bonds to meet the cost.
As they did so, the cost of government borrowing continued to rise - which led to yet more bond sales. This has been described as a "doom spiral". In response, the Bank said it would buy up to £65bn of bonds, hoping this would bring prices back to more stable levels.But it has been rising again and the purchase of bondsThe governor of the Bank of England, Andrew Bailey, is responsible for overseeing the Bank's main responsibilities:
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