The Ramification of Bank of England Bailout of the UK Pension Market on the USD, US Bond Markets & Global Commodity Markets

On 27 September 2022, I predicted in this article, the level to which I believed the USD index would continue to rise before reversing. However, the very next day, on 28 September, the Bank of England (BOE) announced that they would engage in unlimited long-term bond purchases to prevent a catastrophic UK pension collapse, possibly in the trillions, that undoubtedly would have had consequences in other Western markets.  

So why did the BOE have to bail out the UK pension market? Typically, pension funds invest heavily in bonds as they perceive bonds to be among the safest assets in the asset arena, though this has not been true for a while now.  With bond prices collapsing, pension funds throughout the UK received margin calls which they could not meet, an event that forced more liquidation of bonds that led to lower bond prices in a negative feedback loop, much like the one I discussed many months ago here that will also materialize with BTC prices (and of which the vast majority of HODLers are completely ignorant) if it breaks the point of no return that I’ve mentioned many times in subscriber only posts on this platform. Thus, to prevent a multi-trillion dollar collapse of UK pensions, the BOE intervened and saved a UK bond market collapse.

BOE bankers announced on 28 September that they not only purchased $1.07B of long-term bonds with maturities of 20 years or more, but they also announced that such operations will continue every weekday until 14 October. What is the chance that operations will terminate on 14 October? Zero. Besides buying long-term bonds, the BOE also announced that they would not begin off-loading the bonds on their balance sheet that was scheduled to start yesterday.  This delay in selling their bond holdings is likely indefinite as well. But such decisions are not without repercussions