BoE should extend bond buying to Oct 31 or "possibly beyond"-pensions trade body

People walk outside the Bank of England in London
People stand outside of the Bank of England in London, Britain, October 10, 2022. REUTERS/Hannah McKay

LONDON, Oct 11 (Reuters) - The Bank of England should consider continuing an emergency bond-buying programme aimed at stabilising the market for UK government debt to October 31 "and possibly beyond", the Pensions and Lifetime Savings Association said on Tuesday.

A 1.6-trillion pounds ($1.77 trillion) corner of Britain's pension fund industry has been rocked by a rout in UK government bond prices ever since Finance Minister Kwasi Kwarteng unveiled a slew of unfunded tax cuts last month, sparking concerns for the UK economy and a huge investor selloff.

The unprecedented market moves triggered hefty collateral calls on hedging strategies that many funds are still struggling to meet, prompting the BoE to say on Sept. 28 it would buy up to 5 billion pounds of gilts of at least 20 years duration daily until Oct. 14, in an attempt to stabilise prices.

"A key concern of pension funds since the Bank of England's intervention has been that the period of purchasing should not be ended too soon," the PLSA said in a statement.

"...many feel it should be extended to the next fiscal event on 31 October and possibly beyond, or if purchasing is ended, that additional measures should be put in place to manage market volatility".

The BoE on Monday doubled the maximum size of the buybacks and on Tuesday expanded the programme to include inflation-linked gilts, a move welcomed by the PLSA. read more read more

"We continue to encourage all pension funds and service providers to use this period to take further steps to rebalance portfolios and ensure necessary measures are in place to protect their strategies in uncertain times," the trade body said.

($1 = 0.9061 pounds)

($1 = 0.9057 pounds)

Reporting by Carolyn Cohn, editing by Sinead Cruise

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