Bank of England governor Mark Carney.
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“It will be a relief to the Bank that this has been well-covered and that a decent amount of the purchases were made at levels that were slightly below where the market had been trading”, said Jason Simpson, a fixed-income strategist at Societe Generale SA in London.
The Bank of England’s (BoE) comprehensive package, especially the introduction of a £10 billion corporate bond purchases has triggered a mega surge in bond issuance from United Kingdom corporates as the companies join in to avail the benefits of lower yields.
The central bank last bought significant volumes of gilts in 2012, and now aims to buy 60 billion pounds of government debt over the next six months.
The “reverse auction” was oversubscribed by nearly 2.7 times, which helped restore confidence in the Bank’s plan after a £52 million shortfall last week pushed bond yields in the United Kingdom and Europe down to record lows. “Two uncovered buybacks early on would have been very unfortunate”.
The yield on the benchmark 30-year gilt fell to a record low of 1.18% on Thursday.
Picture the scene. It is referendum day and officials from the Bank of England and the Debt Management Office are meeting to discuss contingency plans for if the United Kingdom votes to leave the EU.
The steep drop in sterling since June’s referendum has led to a sharp increase in the cost of oil, metals and other materials used by manufacturers, leading to a 4.3 per cent rise in input prices in July, according to ONS data. The pound also rose over 1pc against the Greenback to $1.302.
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BoE officials blamed quiet August markets for the lack of sellers in its first purchase of long-dated bonds and said they planned to make up the £50m shortfall this year.
