![]() Investors are waiting to hear from Kwarteng on how his economic growth plans will be funded, with a major statement and new official economic forecasts also due on Oct. 31 the start of its sales of gilts - a big step in the unwinding of its quantitative easing (QE) stimulus push over the past decade - in order to launch the emergency purchase programme. The British central bank has postponed until Oct. "Eventually, the gilt sell-off could force the BoE back into the market," Antoine Bouvet, a strategist at ING, said. Investors are worried about what will happen to the market after most of the BoE's emergency support measures end. Some gilts have lost more than 75% of their value this year, reflecting a global rise in inflation and interest rates as well as market suspicion of the government's budget plans. Kwarteng told parliament he was committed to "getting to the bottom" of what had happened in the long-dated gilt market. The broader government bond market was more stable than on Monday, although 30-year bonds extended their price slide.Īt an auction on Tuesday, Britain's Debt Management Office received strong demand but had to offer investors the highest return since 2008 to sell 900 million pounds of index-linked gilts due in 2051. It bought 1.36 billion pounds of standard long-dated bonds in a second operation of the day. Inflation-linked gilts, typically held by pension funds and known in the market as linkers, suffered a massive sell-off on Monday as the end to the BoE's programme on Friday approached.Īt its first buy-back of inflation-linked bonds on Tuesday, the BoE bought 1.95 billion pounds' worth of linkers, the largest single operation of the programme so far, but as in previous days less than the maximum it had set. 14 deadline, and possibly beyond the end of this month.Īsked his view on this request, Bailey told Reuters: "I think they need to concentrate on doing everything they need to do to be done by the end of this week."īailey was keen to distinguish between the temporary, financial stability nature of the latest intervention and previous quantitative easing stimulus. "It's a big hole," a pension industry consultant said of the latest moves in markets.Ī pensions industry group urged the BoE to extend its bond-buying support beyond its Oct. 14 to allow a more orderly disposal of assets. Many did so by selling gilts, sparking a vicious cycle of falling prices that forced the BoE to pledge to buy as much as 65 billion pounds of long-dated government bonds between Sept. The funds were forced to stump up emergency collateral in liability-driven investments (LDI), which use derivatives to hedge against shortfalls in pension pots, after gilts dropped sharply in value. 23 when he announced the government's plans for 45 billion pounds of unfunded tax cuts. Pension funds have scrambled to raise cash since finance minister Kwasi Kwarteng sparked a bond rout on Sept. Sterling fell more than a cent against the U.S.
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