Bank of England bolsters plan to calm market turmoil

The Bank of England has announced new measures aimed at ensuring an "orderly end" to its emergency bond buying scheme, which it brought in when some pension funds were at risk of collapse.

The Bank says that it will now buy up to £10bn of government bonds a day, double the previous limit of £5bn.

So far the Bank has bought only around £5bn bonds under the £65bn programme.

The scheme was introduced after the government's mini-budget sparked turmoil on financial markets.

The pound hit a record low and investors had demanded a much higher return for investing in government bonds, causing some to halve in value.

Some funds linked to pension schemes, which invest in bonds, were forced to start selling, sparking fears of a fresh market downturn.

When the Bank stepped in, it said its decision to buy government bonds was driven by concern over "a material risk to UK financial stability."

The government borrows money to fund its spending plans by selling bonds, or "gilts", to investors such as pension funds and big banks on international markets.

But a collapse in the price of those bonds in the aftermath of the mini-budget was forcing some funds to rush to sell bonds further forcing down the price.

If that process had continued, there was a risk that those pension funds could have got to a position where they could not pay their debts.

To stop this from happening, the Bank said last month that it would buy up to £65bn of government bonds until 14 October.