All financial crises have their peak days, the moment of drama when everything comes to a head. Think of Black Monday – 19 October 1987 – when the bottom fell out of global stock markets, or Black Wednesday – 16 September 1992 – when the pound crashed out of the Exchange Rate Mechanism. With the Bank of England saying that it will cease emergency purchases of gilts tomorrow (although it is reported to have told pension fund managers a different thing in private) could we be facing a Black Friday? Some things to look out for tomorrow morning….
Gilts crash (ie yields rise sharply)?
This afternoon, things have been going in the other direction. Gilts have been perky, as confidence rises that pension funds have succeeded in offloading sufficient gilts, and raising sufficient cash, to keep themselves out of trouble.
On Wednesday, it was revealed today, the Bank of England purchased £4.4 billion worth of gilts – the largest purchase in any day since it announced its gilt-buying programme two weeks ago. But yields remain much higher than they were before Kwasi Kwarteng’s mini budget on 23 September. But we will soon find out if pension funds have done enough to cover their positions
Stocks crash?
Today, the FTSE has been going in the opposite direction to the bond markets, with early gains wiped out. By early afternoon the FTSE100 was showing a loss of 1.5 per cent on the day – this following a dreadful three days at the beginning of he week. Today’s fall in stocks is related to rumours that the government will backtrack on more of Kwarteng’s mini-budget, in particular the Chancellor’s decision to cancel a rise in corporation tax.
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