LONDONThe Bank of England said Wednesday that its program of bond purchases to support pension funds and prevent a possible financial market crisis would end Friday as planned, causing a brief surge in bond yields and setting the stage for a tense few days in U.K. financial markets.

The move was seen by investors as a strong signal by the central bank and Gov. Andrew Bailey that its priority remains fighting inflation, even if that raises the likelihood of deeper turmoil in U.K. financial markets in the coming days and weeks, jitters that also have hit some U.S. markets such as junk bonds.

Prices for the U.K. government's long-term debt fell sharply early Wednesday, causing yields to soar, but pared most of their losses by late afternoon, while the pound gained against the U.S. dollar.

The BOE began buying U.K. government bonds on Sept. 28, days after the government unveiled a package of government tax cuts that caused worries about inflation and rising government debt, sending shock waves through the country's markets. Falling prices for U.K. government debt set off an unexpected chain reaction, as pension funds that held derivatives linked to government bonds were forced to sell assets, prompting a further decline in bond prices and more selling.

The bank stepped in to prevent a full-blown financial crisis. It extended the program to inflation-linked bonds Tuesday, but has insisted it wouldn't extend the deadline, giving pension funds until Friday to reduce their exposure to the derivatives, a feature of so-called liability-driven investing.

On Tuesday, Mr. Bailey warned pension funds the program would end Friday and told them they had only three days "to get this done." Analysts say the banks and pension funds have unwound some of their exposure but not all.

On Wednesday morning, the bank reiterated Mr. Bailey's comments and appeared to dismiss a media report that it would extend the program. "The governor confirmed this position yesterday and it has been made absolutely clear in contact with the banks at senior levels," the BOE said.

Mr. Bailey's tough line on ending the program is a gamble that the problems among pension funds will be resolved without causing wider damage, analysts said. If there is an uncontrolled rise in yields in coming days, that could prompt the bank to re-enter the market.

Yields on both conventional and inflation-linked gilts shot up early Wednesday before easing after the bank announced the results of its daily auction to buy bonds, with only two days left in the program. The 30-year yield reached 5.088%, up from 4.771% Tuesday, before sliding to 4.783%.

On Wednesday, the BOE's purchases of gilts rose moderately but still remained well below its 10 billion limit. It bought 2.38 billion of conventional debt and 1.98 billion of inflation-linked bonds. The central bank accepted all offers from sellers of conventional bonds, which analysts said helped calm the market.

The bank purchases "should help (and is helping) but the fact remains that they are poised to end the program on Friday," said Peter Schaffrik, a macro strategist at RBC Capital Markets.

The pound rose 0.9% to $1.107 in what analysts said was a sign of confidence by investors that the bank was taking the fight against inflation seriously by not extending its program of bond purchases.

Analysts said the bank has to balance providing just enough support to the bond market to prevent a meltdown, but not so much that it becomes an artificial source of support for government-bond prices or undermines its own goals to fight inflation.

"It's a difficult balance to strike," said Athanasios Vamvakidis, head of G-10 foreign exchange strategy at Bank of America. "If they provide too much support [to the bond market], that's negative for sterling, but if they don't provide enough support [and risk a crisis] that's negative to sterling. If they strike that balance, you can have sterling appreciating."

Other investors said it was up to the U.K. government to stabilize markets by addressing worries about its budget plans. "The best solution is if the government dials back what they've done," said Seema Shah, chief global strategist at Principal Global Investors. "The government does not understand market function, which creates an even bigger problem that the Bank of England has to keep mopping up."

The financial turmoil has put the new government of Prime Minister Liz Truss in a quandary. Analysts say it faces one of three difficult choices: take another embarrassing U-turn and scrap more of the planned tax cuts; undertake politically damaging spending cuts to prevent government debt from spiraling higher; or do neither and risk the wrath of financial markets.

On Wednesday, Ms. Truss said her government wouldn't make cuts to public spending. "What we will make sure is that over the medium term the debt is falling. But we will do that not by cutting public spending but by making sure we spend public money well," she said.

U.K. Chancellor of the Exchequer Kwasi Kwarteng has promised to lay out spending plans in detail on Oct. 31, telling lawmakers on Tuesday that the government had "an absolutely iron commitment to fiscal stability."

The Institute for Fiscal Studies, a think tank, estimates the government will need to make up 62 billion in spending cuts if it doesn't roll back more of the planned tax reductions or spending increases. The government has said tax cuts will spur far higher growth at a time of looming recession.

The government's fiscal plans, announced on Sept. 23, put the central bank in a difficult position, investors said. By stepping in to buy government bonds to calm the market turmoil, it was forced to temporarily postpone plans to start selling government bonds as it tries to fight inflation by raising interest rates and tightening money supply.

One reason the BOE is planning to end the emergency program is that it hasn't been used to its full capacity, according to officials at the central bank, likely because pension funds were reluctant to sell their positions at a steep loss.

Please read the attached article and provide an analysis as to how and why the things going on in England could affect a US based business?