Threadneedle Street received a return of approximately 20pc from the buyers who paid £23bn to buy the bonds.
The Bank of England earned nearly £4bn from its pension market intervention, which helped to bring down Liz Truss’s government.
After it closed down the emergency bond-buying program it started in September after September’s chaos mini-Budget, Threadneedle Street is believed to have made a £3.8bn profit.
As part of the scheme, the central bank purchased more than £19bn worth of long-term gilts. It claimed it was doing so to stop a market shock that could lead to a larger economic crisis.
The Bank stated that if the market were to become dysfunctional, it would pose a significant risk to the UK’s financial stability.
Although the emergency measures were effective in calming investor fears and preventing further turmoil in the pension markets, the warning about financial stability played an important role in Kwasi Kwarteng’s eventual removal as chancellor and Ms Truss’s defenestration.
Sir John Redwood is a Tory senior MP. He stated that the bond market was already destabilised prior to the mini-Budget. First, the Federal Reserve took a very hawkish position… then the Bank of England announced a very hawkish stance the day before, and most importantly, it would sell out a lot of bonds for a loss. This was something it didn’t need to do.
“It was right for the government to intervene, but it was wrong for the market to become unstable.” I am happy that these transactions have made their money.
The Telegraph has learned that the Bank will return the PS3.8bn profit to the Treasury in its quarterly transfer process.
The purchase of gilts was made in just two weeks, and Threadneedle Street began selling them at the beginning of November.
The total cost of the bonds was almost £23bn. This netted the Bank approximately £3.8bn profit, which is around 20pc.
An obscure strategy called liability-driven investment was at the heart of the financial crisis. This prompted concerns that many British retirement funds might collapse and forced the Bank into intervention.
In the aftermath of Mr Kwarteng’s mini-Budget, high bond yields led to large cash calls to pension funds for LDIs (derivatives that help protect pension funds against the inflation impact).
Funds were asked to raise more capital in order to protect their investments due to the falling value of bonds.
The Bank announced that its sale of the bonds was completed on Thursday. It added: “The purchases were made in order to restore orderly market circumstances following dysfunction in UK’s gilt market and reduce contagion risk to credit conditions for UK households, businesses, and individuals.”
Separately, a powerful group of MPs attacked the International Monetary Fund for not allowing parliamentary scrutiny of its commentary on UK budgets.
After Ms. Truss’ minibudget was criticized by the media, the fund issued a warning rebuke. However, it refused to appear before MPs.
Harriett Baldwin is chairman of the Commons Treasury Committee. She stated: “I am concerned that the IMF has become an untenable institution, providing commentary to journalists, but not being ready to follow up with appearances in front of elected politicians.
“I will continue to push to have the IMF’s top brass appear before the Treasury Committee. They should limit their comments to the official reporting programme, and not provide interim running commentary for journalists.
