The FTSE 100 rebounded from it’s worst levels on Wednesday after the Bank of England stepped in to support the bond market with long dated purchases.
UK 10-year Gilt yields had hit 4.611% on Wednesday before dropping back to 4.03% following the announcement of the BoE’s actions.
Soaring bond yields were a result of the UK governments mini-budget which was criticised by the IMF due to the timing of the measures.
The move by the Bank of England would have been unthinkable just a week ago as markets were focused on the bank’s tightening of rates.
The pivot has arrived:
— zerohedge (@zerohedge) September 28, 2022
Bank of England will carry out temporary purchases of long-dated UK government bonds from September 28 to restore orderly market conditions, according to a statement.
With bond yields around 4.5%, they rivalled the FTSE 100’s yield and made the equity index look less attractive for income seekers who would have been able to gain a similar yield in the safety of government bonds.
The Bank of England’s measures helped lift the FTSE 100 off lows of 6,836 to trade at 6,963, down 0.3% at the time of writing.
Burberry rallies
Burberry topped the FTSE 100 risers after the luxury brand announced Riccardo Tisci will be stepping down as Chief Creative Officer.
“The rise in Burberry’s share price is perplexing given the news that chief creative officer Riccardo Tisci is leaving, as he was well respected. Yet in the fickle world of fashion, trends come and go, and so the arrival of someone new may just have excited investors,” said Russ Mould, investment director at AJ Bell.
“Tisci’s replacement is Bradford-born Daniel Lee who is credited for helping to breathe some new life into Italian luxury brand Bottega Veneta.”
Burberry shares were 4.3% higher at the time of writing.
Housebuilding shares and UK banks were among the gainers as they cheered the Bank of England’s action at a time the news around the UK economy and housing market was deteriorating.
Asset managers and insurance companies were the biggest drag on the FTSE 100 with Legal & General, M&G, Aviva and Phoenix Group among the top fallers.