Yahoo Finance's Jared Blikre breaks down how stocks are trading after a huge move in bond yields after the Bank of England announced it would buy UK bonds.
- We are beginning with the big market story of the day the Bank of England intervening in the bond market and warning risks to financial stability forced its hand. This coming after a brutal sell off of UK debt. Let's bring in Yahoo Finance's Jared Blikre with more on the market. It has been a really volatile few days across the pond. Of course, we saw the pound come down significantly. And after saying initially, the Bank of England was just going to be watching this. They have now officially stepped into the market.
JARED BLIKRE: That's right, Akiko. And if they're buying bonds now, that's what QE except that's not. It's buying bonds by a different name but essentially, it's the same thing. This is something that monetary authorities around the world have been doing in order to increase risk asset prices. Historically now, the UK faces a crisis with respect potentially to their pension funds. Hearing this from a number of reports but it's not substantiated, not finalized yet.
But pension funds have been underwater facing margin calls because of these huge gyrations that we've had in the bond markets and also the currency markets. Who knows what's happening with their stock market as well. And there you go. There's the UK one year gilt yield. Now you can see that it has come down. That very, very right hand most downward stretch. That is the biggest drop I've seen in at least 30 years. My data goes back to 1992. That is a 100 basis point move.
So for the time being, that is taking some pressure off, Akiko. Long term, that is all the way back to 1992, excuse me. And you can see just overhead is that resistance from 4% to 5%. Now authorities were worried that if it went above 5% and again, this is a 30-year gilt yield that things would become unhinged so they're trying to get ahead of that as much as they can. But they're going to do this into October 14th so roughly two weeks of bond buying left. And hopefully, doesn't cause too much inflationary pressures.
But it looks like this may be something that's localized to the UK not necessarily having contagion effects with respect to the world. However, you have to wonder what is lingering beneath the surface of a lot of other currencies. We just saw the Bank of Japan. They devalued-- well they intervened in the effects market last week. We see a number of currencies around the world, not only developing markets, but also developed markets. I mean, you take a look what's happened in Turkey with the lira there and then you can pair it with the yen. Why are we even making this comparison. Just illustrating the crazy times that we're in.
- Yeah, important to stress again these kind of swings that we're seeing are not typical of developed market currencies. Often we talk about emerging markets but a lot of people scratching their heads today saying, wait, what's going on QE? I thought we were in QT.
JARED BLIKRE: Bit of a reversal.
- This is an hour, apparently.
- The Bank of England, all right. Thanks so much for that, Jared.