Wednesday evening UK news briefing: Why the Bank of England intervened in the bond markets

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Evening Briefing logo

Good evening. Fears of an imminent pension crisis forced the Bank of England to make a £65bn intervention in the bonds market, also helping to support sterling. Find out below how it will affect your mortgage.

Evening briefing: Today's essential headlines

The big story: Bank of England forced to intervene

It was an historic intervention from the Old Lady of Threadneedle Street amid fears of an imminent pension crisis - and yet there are calls for even more action as soon as possible.

The Bank of England has been forced to step into bond markets amid market turmoil that has sent government borrowing costs soaring and posed a risk to financial stability.

The central bank scrapped plans to sell its stock of government bonds and instead has started buying them to address what it called "dysfunction" in the markets.

Despite the measures, which came as pension funds faced margin calls over bond sales, banks have also urged Kwasi Kwarteng to outline his plans to boost economic growth before the date he suggested in November, warning the next Budget was "way too far away".

The Chancellor met bosses at major Wall Street banks this morning in a bid to reassure investors as the yield on 10-year gilts - which is a proxy for the effective interest rate on public borrowing - soared by the most in a five-day period since 1976, according to experts.

Andrew Lilico says come November, Mr Kwarteng must explain exactly how his spending package will be funded.

Here is a Q&A on what the Bank of England is trying to do with its £65bn intervention and whether it will work.

Kwasi Kwarteng meets with investment bankers - Simon Walker/HM Treasury
Kwasi Kwarteng meets with investment bankers - Simon Walker/HM Treasury

Liz Truss has been accused of "inept madness" by one of her own MPs after the pound hit an all-time record low of £1.03 against the US dollar on Monday.

Simon Hoare, the Tory chairman of the Northern Ireland select committee who was a supporter of Rishi Sunak's campaign, did not hold back on Twitter.

Robert Largan, the MP for High Peak, voiced his "serious reservations" about some of Ms Truss and Mr Kwarteng's measures as Tory divisions widened.

Sir Keir Starmer said Parliament should be recalled to address the turmoil.

Jeremy Warner details how Margaret Thatcher knew that sterling parity with the dollar would be a point of no return and warns devaluation threatens a downward spiral.

Mortgage calculator

In the wake of the market sell-off, lenders have pulled a record number of mortgage deals from sale in the last 24 hours amid concerns at banks that interest rates will rise significantly in the coming months.

Analysts expect the Bank of England to counter soaring inflation by raising the Bank Rate as high as 6pc next year.

Moneyfacts, an analyst, said 935 deals have been withdrawn in the last day by spooked lenders.

This is more than double the previous record fall, which was 462 withdrawals on April 1 2020, during the first Covid lockdown.

However, traders have reined in their interest rate expectations, with markets expecting the Bank Rate to peak at 5.75pc next spring.

Use this mortgage calculator to find out how much more you will pay as interest rates rise.

Ways to make money

Yet in the chaos, there are ways to make a profit. Retirees taking out an annuity today are earning hundreds of pounds more than those who bought the best priced deal just a few weeks ago, following the dramatic rout in the bond market.

Pensioners can secure £400 a year more if they buy an annuity now with £100,000, versus what they would have received three weeks ago, according to new data.

Tom Stevenson details how a crisis like this creates no shortage of ways to make money.

Comment and analysis

Around the world: Putin urged to annex regions

The Russian-installed leaders of four Ukrainian provinces have called on Vladimir Putin to formally incorporate them into Russia, after holding what Kyiv and the West denounced as sham referendums held at gunpoint. Moscow is poised to annex swathes of Ukrainian territory after releasing the results of the staged votes, which it said showed overwhelming support for joining Russia. Volodomyr Zelensky, the Ukrainian President, denounced the votes as a "farce". Earlier, Russia fired a salvo of missiles at Ukraine's second city Kharkiv hitting a railway yard and knocking out power to more than 18,000 households, according to officials. Meanwhile, new recruits to the Russian army are being told to ask their wives and girlfriends for tampons to use as bandages in the event they get shot, as military supplies run out.

Wednesday interview

'My time at Chelsea would make for a shocking autobiography'

Portuguese manager Andre Villas-Boas reveals to Jason Burt what really happened at Stamford Bridge and Tottenham, visiting slums in India and why he wants one more job in football

Read the interview

Sport briefing: Yorkshire face £550k damages claim

Yorkshire are being sued for more than half a million pounds by their former medical chief after terminating his contract in the wake of the club's racism scandal on the basis of explosive allegations he engaged in "illegal" sexual activity with a prostitute. The Telegraph can reveal the crisis-hit county are the subject of a High Court claim from former England physiotherapist Wayne Morton that lays bare a string of shocking allegations made against their ex-head of sports science and medicine during Lord Patel's brutal purge of the club's coaching and medical staff. In football, the Telegraph can reveal how Newcastle United are still paying hundreds of thousands of pounds a month to cover the wages of players who are no longer at the club. Meanwhile, in a rare interview, Rod Laver has opened up on his "connection" with Roger Federer and being a fan of fellow Australian Nick Kyrgios.

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Business briefing: How UK squandered its oil bonanza

As the prospect of an energy crisis looms over Europe this winter, Liz Truss has vowed to shore up the UK’s domestic supplies "once and for all". Alongside a big push towards wind, solar and nuclear power, the Prime Minister's strategy for energy independence by 2040 will see more than 100 new licences issued for oil and gas extraction in the North Sea. It has already triggered howls of protest from green campaigners, who are resolutely against new drilling activity. Meanwhile, the oil industry has complained that a windfall tax levied by the Government on the profits of North Sea operators — designed to capture some of their gains from the surge in oil and gas prices that followed the Ukraine war — risks harming investment. Professor Alex Kemp analyses how painful trade-offs have led Britain to squander its North Sea oil bonanza.

Tonight starts now

Shakespeare North Playhouse | Many hope this £30m Shakespearean venture, sat just past a superstore, will put the fairly unprepossessing Merseyside town of Prescot, near Liverpool, on the cultural map. During the 1590s, here apparently stood the first free-standing, purpose-built playhouse outside London, until it was converted into housing. Today the new 470-seat Shakespeare North Playhouse – boasting an oak-framed, octagonal, two-level main auditorium – aims to attract 140,000 visitors per year. Though that may be a challenge, the venue a is wonder to behold and it will need work of the calibre of Matthew Dunster's A Midsummer Night's Dream – the Playhouse's opening production running until October 22 – to secure its reputation. Dominic Cavendish reviews the magical kick off for the new North's newest venue.

Three things for you

And finally... for this evening's downtime

Officially the best island on Earth | This year's World Travel Awards has uncovered one of the best-kept secrets of the South Seas – and now's the time to visit. Anna Selby unravels the paradise.

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