The Bank of England postpones the start of the sale of gilts to November 1st

The Bank of England said it will delay the sale of government bonds to November 1 due to the fiscal announcement later this month.

The central bank was supposed to start buying British government bonds, called gilts, on October 31st.

Tuesday came when the bank denied reports that it was postponing the bond selling program in an effort to allow ailing gilt markets to recover from the mini-budget chaos.

“The first gilt sale was to take place on October 31 and proceed thereafter,” the Bank said in a statement Tuesday evening.

“In light of the government’s fiscal announcement now scheduled for October 31, the first gilt sale transaction will take place on November 1.”

New Chancellor Jeremy Hunt will unveil the tax announcement later this month, which will backtrack on a series of previous tax cut plans after predecessor Kwasi Kwarteng’s mini-budget rocked market participants.

The Bank of England update came after it was reported that senior central bank officials had decided to delay plans to dump some of its £ 838bn of UK government bonds later this month – or gilt – purchased under the so-called quantitative easing program.

As part of its emergency bond purchase action launched late last month, the Bank said it would postpone this plan – known as quantitative tightening (QT) – from 3 October until the end of October.

The Financial Times reported that it was now expected to push QT further back after leading Bank figures sought to give the “very struggling” gilt market more time to recover.

This morning’s FT report that the BoE decided to delay sales of MPC (“QT”) gilts is inaccurate.

The spokesman for the Bank of England

But the Bank rejected the report early Tuesday, dropping the pound to US $ 1.126 in one phase and impacting gilts after Monday’s rebound.

The pound has since rebounded to 1.132, but bond markets were closed at the time of the Bank’s new statement.

A spokesman for the Bank said: “This morning’s report that the BoE decided to delay sales of MPC (” QT “) gilts is not accurate.”

Experts and investors have increasingly asked the Bank to keep its QT plan, given fears that it could trigger another gilt sale.

Gilts surged on Monday as financial markets were placated by new Chancellor Jeremy Hunt’s emergency statement that destroyed nearly all of his predecessor Kwasi Kwarteng’s tax cut plans, with 30-year government bond yields falling. about 10%.

But the rebound has yet to undo the impact of the recent market turmoil, with yields significantly above the 3.75% level seen before Kwarteng unveiled its disastrous mini-budget on Sept. 23, and it was up another 0 on Tuesday. , 5%.

The latest reaction to the Bank’s denial of the QT shows just how sensitive the gilt markets still are.

Former pension minister, Baroness Ros Altmann, is among those who urged the Bank to completely halt its plan to dump £ 80bn of gilts.

The Bank must suspend its QT … not telling the markets it is not going to enter the market with 80 billion pounds in sales would incite further chaos

Baroness Ros Altmann

He recently told the PA news agency: “With 80 billion pounds of gilt sales towering the market, the market is very likely to plummet again.”

“The bank must suspend its QT … not telling the markets it is not going to enter the market with £ 80 billion in sales would create further chaos,” he added.

But the Bank is believed to be keen to show its independence from the government and focus on its priority of fighting rampant inflation by raising interest rates and reducing its balance sheet of accumulated bonds through QE.

Separately on Tuesday, Deputy Governor Sir Jon Cunliffe told the Treasury Committee that the Bank is continuing to monitor developments in conventional and index-linked gilt markets this week after its emergency bond purchase program ended on October 14.

In a letter to the chairman of the committee Mel Stride, Cunliffe said: “The Bank and the FPC (Financial Policy Committee) will continue to monitor market conditions, channels through

what vulnerabilities could amplify future market tensions and national and international progress towards reforms in the NBFI (non-bank financial institution) sector “.

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