After days of financial panic, the markets rushed to lose UK government bonds. Pension funds had become increasingly vulnerable due to their indulgence in liability-driven investments (LDIs) and were on the brink of going under. The Bank of England promised to buy bonds “on whatever scale is necessary” to calm matters, as mortgage providers rushed to scrap offers.
Liz Truss would later suggest that “at no point during any of the preparations for the mini-Budget” was the issue of LDIs explained to Kwasi Kwarteng or herself. The Bank warned of a “material risk to UK financial stability”, amid hopes its £65 billion intervention was enough to calm matters. Downing Street dismissed any suggestions that the Chancellor would resign.
Across the Atlantic, Kemi Badenoch told an audience of American ‘captains of industry’ that the UK was heading for the “kind of radical change that we’ve not seen for 40 years”. John Redwood criticised the International Monetary Fund for criticising the UK, as Allister Heath urged her to hold her nerve in the face of a global recession. Rishi Sunak decided to skip Tory conference.
With acknowledgments to Harry Cole and James Heale‘s Out of the Blue: the Inside Story of the Unexpected Rise and Rapid Fall of Liz Truss