I know it’s got something to do with government bonds but I don’t understand the mechanics.
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Those in charge of monetary policy announced changes that panicked the market and sent it down very quickly. Because it was falling so quickly there was risk that pensions that invest both money they are given and money they borrow would be required to pay back the borrowed money immediately. This is known as a margin call.
Pensions typically invest in assets that are less risky but that also means they typically cannot be turned into cash quickly which is necessary if you need to pay off margin. If you get margin called and cannot pay back your debt the rest of your assets are liquidated at the current market rates until your debt is fulfilled. This means huge losses to those who had their money in the pension funds.
The Bank of England wanted to head this off and so they said they would prevent it from happening by buying as many bonds as needed to keep the pensions safe.
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