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Bank of England has denied reports that it wanted to delay the sales of government bonds worth billions of pounds.
During the quarantine easing program, the UK government acquired gilts worth £838 billion. The plan was to begin the sale on October 6. However, due to the turmoil caused by the mini-budget, the sales have been delayed until the end of the month. There were reports that the UK government deliberately put the sales on hold.
The BoE Says The Report Is “Inaccurate”
The Financial Times reported that the central bank had decided to extend the delay until the market becomes calmer. According to the report, the officials decided to bow to financial pressure and judged that the gilt market is very “distressed.”
However, the BoE addressed the report, noting that FT’s statement that the BoE had decided to delay the MPC gilt sales is inaccurate.
The pound and gilt yields fell shortly after the mini-budget. The turmoil led to the sack of former Finance Minister Kwasi Kwarteng. Prime Minister Liz Truss had to cancel most of the policies as she tried to calm the storm. Kwarteng’s replacement Jeremy Hunt had announced that the UK government will focus on economic growth as usual, but will do it in a stabilized environment. He stated that the earlier decisions taken by the administration were too sudden and too fast.
Market Uncertainty Clouds Gilt Sales
The central bank is providing a £65 billion temporary support package for the bond market, which closed on Friday. Additionally, the alteration of the previous fiscal policy has helped to maintain order in the market. Following the move, 30-year yields have fallen back to 4.32% after reaching a high of more than 5%.
But yields have stayed relatively higher than the 3.75% held before the mini-budget. As a result, many observers are worried that the fragile market is still susceptible to shocks.
Head of Investment at Interactive Investor, Victoria Scholar, noted that the central bank is still determined to ensure the orderly performance of the financial markets. She suggested that the BoE should delay the sale of bonds for now since the market is still looking very uncertain. She said selling bonds now will add to pressures in an already-fragile market.
Read more: https://www.economywatch.com/bank-of-england-denies-reports-of-delays-in-issuing-of-bonds