INVESTORS were reportedly selling off government-backed bonds while Prime Minister Liz Truss was giving a series of interviews with local radio stations.
While the fears of a full-blown financial crisis grow, sparked by her Chancellor Kwasi Kwarteng's mini-budget on Friday, Truss stuck to the script and refused to back down on her policy decisions.
However, it appears her refusal to U-turn on her "growth plan" has not calmed the markets as it was intended to do.
Bloomberg reports that investors are "worried" by Truss's comments and are selling gilts, bonds issued by the UK Government, which means that they are selling yields.
"They're not reassured by her doubling down," Kitty Donaldson, Bloomberg's UK political editor, wrote on Twitter.
This is a chart of the UK government bond market while Liz Truss has been on air
- investors are worried by her comments, are selling gilts and the yields rise.
- short version: they’re not reassured by her doubling down pic.twitter.com/oML88M7c7r
— Kitty Donaldson (@kitty_donaldson) September 29, 2022
It comes as the "positive glow" from the Bank of England (BoE) intervention on Wednesday - which stopped pension pots from collapsing - in gilt markets has faded and turmoil continues to rock London trading.
London’s FTSE 100 index of companies rallied on Wednesday after the Bank stepped in to say it would start buying Government gilts.
But by Thursday morning gloom had set back in among stock traders. The FTSE dropped as much as 2.2% to a fresh six-month low before recovering somewhat later in the morning.
The Bank’s intervention had also helped to push down gilt yields, which regulate how much it costs the Government to borrow.
The Bank said it would buy gilts – essentially the same as printing money – by up to £65 billion in the coming weeks.
Yields on 30-year gilts dropped from a little over 5.1% on Wednesday morning to slightly below 4% just 24 hours later. But the yield is still considerably ahead of where it had been before the mini-budget.
“Gilt yields plunged yesterday while prices jumped after the Bank of England carried out an emergency intervention to buy an unlimited amount of long-dated bonds to restore confidence in a dysfunctional market,” said Victoria Scholar, head of investment at Interactive Investor.
She added: “Amid a volatile week for UK markets with the FTSE 100 having swung from losses to gains yesterday, the UK index has opened lower with the positive glow from the Bank of England’s £65 billion intervention fading fast.”