The Bank of England’s purchase of government debt following the turmoil that followed the Chancellor’s severe tax cuts appeared to stabilised the market.

Kwasi Kwarteng told a group of investment bank executives that he is “working closely” with the Bank of England to calm markets.

The chancellor and City minister Andrew Griffith said the government has a “clear commitment to fiscal discipline” and would not be reversing its tax-cutting plans despite the negative market reaction.

The meeting came after the International Monetary Fund’s criticism of the government’s strategy.

There has been significant repricing of UK and global financial assets, which has become more significant in the past few days and has affected the functioning of core financial markets. This has been particularly acute for long-dated UK government debt.

A collapse in the price of those bonds was forcing some pension funds to sell gilts and assets, further forcing down the price.

If that process had continued, there was a risk that those pension funds being unable to pay their debts.

The Bank’s intervention – spending £65bn – appeared to have some effect. By late afternoon the 30-year gilt yield was down 100 basis points at 3.925% while the 10-year was 45 basis points lower at 4.05%.

The FTSE 100 closed in positive territory, up nearly 21 points, or 0.3%, at 7,005. In the currency markets, the pound stood at $1.08, off its worst for the day.

The Bank’s move was triggered by yields on UK government debt surging to levels not seen since 1998. The 30-year UK gilt shot up to around 5.05% earlier today, while the 10-year gilt, the benchmark for interest rates in Britain, was also higher.

“The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome,” the Bank said.

A Treasury spokesman said: “The Bank of England, in line with its financial stability objective, carefully monitors financial markets and any potential risk to the flow of credit to the real economy, and subsequent effects on UK households and businesses.

“Global financial markets have seen significant volatility in recent days. The Bank has identified a risk from recent dysfunction in gilt markets, so the Bank will temporarily carry out purchases of long-dated UK government bonds from today (28 September) in order to restore orderly market conditions.

“These purchases will be strictly time limited, and completed in the next two weeks. To enable the Bank to conduct this financial stability intervention, this operation has been fully indemnified by HM Treasury.

“The Chancellor is committed to the Bank of England’s independence. The Government will continue to work closely with the Bank in support of its financial stability and inflation objectives.”