The governor of the Bank of England made clear its emergency support programme for the county’s fragile bond market will end on Friday – sparking another sell-off of the pound.

Andrew Bailey warned pension fund managers “you’ve got three days left” to balance the books as the central banker made clear efforts to shore up the financial markets had to be temporary.

It’s almost two weeks since the Bank launched a massive programme to help pension funds cope with a slump in bond prices triggered by the announcement of unfunded tax cuts by the new Liz Truss government.

Earlier on Tuesday, it made a fresh attempt to soothe market chaos, enacting another round of emergency bond-buying after a renewed bout of market turbulence.

Investors have been selling-off government bonds – also known as gilts – as investor concerns about the state of the British economy has failed to subside.

Following the announcement by the governor, the pound plunged against the dollar to below $1.10.

Spooked by the biggest raft of tax cuts for half a century, the pound fell to its lowest point ever against the dollar following the mini-budget – dropping to just over $1.03 – but has rebounded since in no small part thanks to the Bank’s efforts.

At an event organised by the Institute of International Finance in Washington on Tuesday, Bailey said: “We have announced that we will be out by the end of this week. We think the rebalancing must be done.

“And my message to the funds involved and all the firms involved managing those funds: You’ve got three days left now. You’ve got to get this done.”

Earlier on Tuesday, the Pensions and Lifetime Savings Association, an industry body, urged the BoE to extend the bond-buying programme until October 31 “and possibly beyond”.

On Tuesday, the Bank said it needed to broaden the emergency programme to buy UK government bonds to calm markets as it warned over a “material risk to UK financial stability”.

It came after a further sell-off in the gilt market, which saw the yields on long-dated government bonds rise back up close to levels seen in the immediate aftermath of the mini-budget.

UK government bonds are a way for the government to raise money.

A gilt is essentially an IOU that the Treasury writes to its lenders, promising to pay the money back, plus interest, within a time frame, for example over two, 10 or 30 years.

The yield on a gilt is the amount of money an investor receives for owning the debt and is represented as a percentage of its price. When a bond price falls, its yield rises.

Yields rise when investors are less willing to own the debt, meaning they will pay a lower price for the bonds.

Concerns over the chancellor’s plans for unfunded tax cuts sent gilt yields soaring as markets fretted over the Government’s economic policies.

At one stage, the yield on 30-year gilts hit levels not seen since 2002 in the chaos that followed the mini-budget statement, while the pound also plunged to record lows against the US dollar.

Pension funds invest huge amounts of money in gilts, which are seen as safe investments in usual times.

In order to protect themselves against sharp rises in government borrowing costs, funds have been investing in products that act as a kind of insurance – so-called liability driven investment (LDI) funds.

But due to the sudden rise in government borrowing costs after the mini-budget, investment banks called on these LDIs to put up assets or cash as securities for loans, which in turn called on pension funds, forcing them into a fire sale of gilts, driving prices still lower and yields higher and creating a downward spiral.

The Bank warned last week that it had been been forced to step in to avoid market meltdown, when some pension funds were left close to collapse and there was a risk of a knock-on impact elsewhere in the financial system.

Its measures initially eased pressure on gilt yields, but they spiked higher again and there are signs the woes may be spreading elsewhere, to index-linked gilts, as well as corporate bonds and even in niche debt markets in the US.

Experts say the gilt rout, which is largely affecting final salary and defined benefit pensions schemes, will not impact policyholders.

The Pensions and Lifetime Savings Association (PLSA) said: “Although there has been a great deal of commentary over the last few weeks, members of defined benefit pension schemes should be reassured that their pension benefits are safe; scheme funding is strong and, despite the operational challenges, funding will have been strengthened further by rising yields.”

Higher gilt yields and the prospect of rising interest rates as the Bank looks to cool rampant inflation have a significant impact on mortgage lenders.

Rates on two and five fixed year deals have gone past 6% for the first time in many years due to the market turmoil, while lenders have also been pulling hundreds of products.

There are concerns that when the Bank’s programme comes to a close on October 14, there will be a further sell-off of gilts, leaving pension funds in chaos once more.

The PLSA has called for the bond-buying programme to be extended to the chancellor’s next fiscal statement on October 31 or even beyond, suggesting there may yet be further intervention from the Bank.