Bank of England offloads £750m gilts


Bank of England brings quantitative easing era to an end as it offloads £750m of gilts

The Bank of England has started selling government bonds bought during its massive money-printing programme.

Threadneedle Street offloaded £750million of the gilts through quantitative tightening (QT), kicking off the unwinding of the huge quantitative easing (QE) programme begun in 2009 during the financial crisis.

In the 13 years since – including the Brexit vote and the pandemic – the Bank bought £875billion of gilts and £20billion of corporate bonds to lower borrowing costs and inject cash into the economy.

Tightening the purse strings: Threadneedle Street offloaded £750m of the gilts through quantitative tightening, kicking off the unwinding of the huge quantitative easing programme

But with inflation at a 40-year high of 10.1 per cent, the Bank is reversing its crisis support by raising interest rates and selling gilts to bring prices back under control.

Having raised rates from 0.1 per cent to 2.25 per cent since December – and with a further increase expected tomorrow – the Bank hoped to start QT last month.

But that was delayed by the chaos in the bond markets in the wake of Kwasi Kwarteng’s mini-Budget.

The Bank embarked on QT yesterday, and it got off to a strong start with investors submitting bids for gilts worth £2.4billion – well above the £750million up for sale.

It is planning to hold eight auctions every quarter for the next year, and will sell £750million worth of gilts at each event.

Despite healthy demand, experts warned that the QT programme could face hurdles as the Government plans to borrow even more from investors. 

Until Prime Minister Rishi Sunak plugs the £50billion hole in the public purse through tax hikes and spending cuts, he will have to keep issuing gilts.

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