The Bank of England (BoE) has confirmed that it will proceed with its plans to sell British government bonds, despite recent drops in long-dated gilt prices. BoE Deputy Governor Dave Ramsden stated that the decline in prices has not altered the central bank’s thinking regarding its quantitative tightening programme. Some bond market analysts, including primary dealers of gilts, have suggested that the BoE may need to adjust its gilt sales strategy due to the falling prices. They propose that the central bank could slow down the sales of long-dated gilts and instead focus on selling more short-dated ones in order to alleviate the selling pressure on the long-dated market. However, Ramsden dismissed this notion, affirming that such changes in yield curves would not affect the BoE’s plans.
The BoE’s Monetary Policy Committee (MPC) had previously decided in September to increase the pace of reducing its £750 billion ($914 billion) gilts stock to £100 billion a year, starting from October, up from the previous amount of £80 billion. Ramsden emphasized the importance of predictability in the bank’s operations and declared that they would adhere strictly to their outlined schedule of auctions for the remainder of the year.
The BoE’s decision to maintain its current plans despite the drop in long-dated gilt prices indicates the central bank’s confidence in its quantitative tightening strategy. This move also suggests the BoE’s commitment to its previously stated goal of reducing its gilt holdings at a steady pace, aiming for stability and predictability in the bond market.
The news of the BoE’s stance on gilt sales comes as the UK continues to grapple with economic challenges brought about by the ongoing COVID-19 pandemic. The BoE’s quantitative tightening programme is part of its efforts to manage the country’s economy in light of the pandemic-induced uncertainties. By gradually reducing its gilt holdings, the central bank aims to maintain control over inflation and ensure a stable and balanced economic recovery.
The BoE’s decision not to alter its plans may disappoint some bond market analysts who had anticipated a change in strategy due to the recent decline in long-dated gilt prices. However, Ramsden’s reassurance that the BoE will stick to its schedule of auctions provides a sense of stability in the market and eliminates uncertainty for investors.
In conclusion, the Bank of England has confirmed that it will proceed as planned with its programme of selling British government bonds, despite recent drops in long-dated gilt prices. BoE Deputy Governor Dave Ramsden dismissed suggestions that the central bank may need to adjust its strategy, stating that the decline in prices has not affected their plans. The BoE’s decision underscores its confidence in its quantitative tightening programme and its commitment to gradually reducing its gilt holdings. This news provides stability and predictability for investors in the bond market amid ongoing economic challenges brought about by the COVID-19 pandemic.
More detail via Reuters here… ( Image via Reuters )