Investors remained nervous after the Bank of England insisted its emergency bond-buying scheme would end this week, dismissing reports it may be extended.
It said the help would end on Friday “as it made clear from the outset”.
The Bank is buying bonds to stabilize their price and prevent a sale which could put some pension schemes at risk.
Bond sales rose after the statement, with borrowing costs almost as high as when the Bank first stepped in to calm market turmoil after the mini-budget.
Chancellor Kwasi Kwarteng’s plans for huge tax cuts without a clear indication of how they would be paid for sparked a dramatic reaction on financial markets last month. The pound fell to a record low and bond prices also fell sharply forcing the Bank of England to step in to stop their price falling further.
The government raises money it needs for spending by selling bonds – a form of debt that is paid back plus interest in anywhere between five and 30 years.
Pension funds invest in bonds because they provide a low but usually reliable return over a long period of time.
However, the sharp fall in their value after the mini-budget forced pension funds to sell bonds, threatening to create a “downward spiral” in their prices as more were offloaded, which left some funds close to collapse.
On Tuesday evening Andrew Bailey told pension funds: “You’ve got three days left now and you’ve got to sort it out.”
The pound initially fell sharply against the dollar before steadying, after Mr Bailey’s surprisingly blunt statement, which dashed hopes the support could be extended.
Mr Bailey told the BBC he had stayed up all night to try and find a way to calm markets and said the Bank was doing everything it could to preserve financial stability, but said it had always been clear that the help would be temporary.
He said it was now down to financial firms to arrange their affairs, saying pension funds had “an important task” to ensure they are resilient.
“I’m afraid this has to be done, for the sake of financial stability,” he said.
