Wednesday, December 7

BoE says report of delay to its bond sales ‘inaccurate’


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LONDON — The Bank of England said on Tuesday that it had not decided to delay again the start of its sales of government bonds after the Financial Times reported that another postponement was likely.

The Financial Times said the BoE would likely push back the start of its gilt sales from its latest scheduled date of Oct. 31, having already delayed it from an original date of Oct. 6.

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“This morning’s FT report that the BoE has decided to delay MPC gilt sales (‘QT’) is inaccurate,” a spokesperson for the central bank said.

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The FT said it had learned that top officials at the BoE had decided that a delay was likely needed after judging the gilts market to be “very distressed” in recent weeks, a view backed by its Financial Policy Committee.

The BoE’s statement on Tuesday prompted a moderate hit to British government bond prices, with the 10-year gilt yield rising 4 to 5 basis points as a result.

Amid turmoil in financial markets, the BoE last month announced an emergency program to start buying gilts again and it pushed back the start of its scheme to sell some of its 838 billion pounds ($954.90 billion) of government bond holdings until Oct. 31 from an original start date of Oct. 6.

The pound briefly rose against the US dollar after the FT report but was down 0.4% at $1.1318 at 10:14 am (0914 GMT).

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The central bank has previously said it would keep a close eye on market conditions but that there would be a “high bar” for any delays to its sales plans.

BoE Governor Andrew Bailey said in a speech on Saturday that the central bank was not using its stock of bonds as an active tool of monetary policy at present and its benchmark Bank Rate remained its primary instrument of policy.

British financial markets have been under strain since former finance minister Kwasi Kwarteng announced a string of tax cuts with no details of how they would be paid for on Sept. 23.

On Monday, new finance minister Jeremy Hunt scrapped most of Prime Minister Liz Truss’s economic plan and scaled back her vast energy support scheme, making a historic policy U-turn to try to stem a dramatic loss of investor confidence.

British bond prices rose after his announcement and were mostly flat in early trade on Tuesday.

Hunt is due to announce a medium-term budget plan on Oct. 31, the same day that the BoE has said it will start selling bonds.

The BoE’s emergency bond-buying program, triggered by the mini-budget, expired on Friday last week. ($1 = 0.8776 pounds) (Reporting by Akriti Sharma in Bengaluru and William Schomberg in London; Additional reporting by Kevin Buckland in Tokyo; Editing by Clarence Fernandez, Sam Holmes, Andrew Heavens, Ed Osmond, William Maclean)



financialpost.com