Bank of England scrambles to protect households from pension ‘contagion’ – live updates

Good morning.

The Bank of England has announced it will ramp up the scope of its £65bn intervention in gilt markets as part of an “orderly end” to the scheme ahead of its closure on Friday.

In a statement this morning, Threadneedle Street said the rate at which it is buying long-term government bonds will be ramped up from £5bn per day to £10bn per day. 

Its decision comes after eight auctions so far in which the Bank offered to buy £40bn worth of bonds but only succeeded in buying £5bn worth. 

The Bank has been purchasing the gilts using newly created money in a process known as quantitative easing.

On Monday Threadneedle Street also said it would also launch a “Temporary Expanded Collateral Repo Facility”, aimed at providing liquidity to banks whose clients are struggling with sudden cash calls. That will continue beyond Friday.

The Bank first announced the bond-buying scheme on September 28 in a bid to calm market “dysfunction” following Chancellor Kwasi Kwarteng’s mini-Budget, which spooked investors and sent pension funds and gilt markets into a “doom-lop” of selling. 

The crisis centred on so-called  liability driven investment (LDI) funds, which pension schemes use to shield themselves against adverse moves in inflation and help match their liabilities with their assets.

5 things to start your day 

1) Businesses risk disaster from pension overhaul Sweeping new rules designed to prevent a repeat of the BHS pensions scandal will cost businesses £30bn and push hundreds of companies to the brink of collapse, the Government has been warned.

2) Rees-Mogg sets out plan to keep hospitals going if gas runs short The Business Secretary has told gas suppliers to keep flows running for as long as possible to users where cut-offs would put lives or welfare at risk, likely including hospitals and nursing homes.

3) 50 pubs closing every month as inflation crisis bites New figures show that there are now around 39,800 pubs in England and Wales, with the number of closures accelerating in summer.

4) Tech chiefs at war over future of the funding that helped forge Silicon Roundabout Tech Nation is expected to lose a critical Government grant, the Digital Growth Fund, which makes up the majority of its revenues and is worth £12m over the next two years.

5) Indian trade talks hit data deadlock​ Whitehall sources said International Trade Secretary Kemi Badenoch may pursue multiple “iterative” trade deals with the protectionist Indian government amid fears that any deal struck before the Diwali deadline will prove “thin”.

What happened overnight 

Stocks slipped in Asia on Monday after a surprise drop in US unemployment quashed any thought of a pivot on policy tightening ahead of a reading on inflation which is expected to see core prices move higher again.

Geopolitical tensions added to the uncertainty as markets waited to see how the Kremlin might respond to the blast that hit Russia’s only bridge to Crimea.

Holidays in Japan and South Korea made for thin trading in Asia, while the Treasury market is also shut on Monday.

S&P 500 futures led the early action with a drop of 0.4pc, while Nasdaq futures fell 0.5pc ahead of the start of Q3 earnings later this week.

MSCI’s broadest index of Asia-Pacific shares outside Japan shed 1.4pc. Nikkei futures traded at 26,575 compared to Friday’s cash close of 27,116.

Chinese blue chips fell 0.9pc after a survey showed the first contraction in services activity in four months.

Coming up today

• Economics: No planned releases
• Corporate: Unite Group, Sirius Real Estate (trading updates)