Economists urge Bank of England to halt bond sales as borrowing costs climb

cityam08-26

The Bank of England has been 'behind the curve' on bond sales, economists said The Bank of England should abort its costly approach to unwinding quantitative easing, which is stoking the government’s ...

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The yield on the 30-year gilt, the name for UK government bonds, was sent to its highest level since 1998 last month, while 10-year gilt yields remain close to post-financial crisis highs of more than 5.1 per cent struck in April.The upward pressure on UK borrowing costs forms part of a wider sell-off of long-dated government bonds that last week led US Treasury secretary Scott Bessent to double its buyback of debt; an unusual move to keep long-term debt costs down.","collect":0,"end_time":0,"defaultTopTitle":"cityam.com","property":["earning"],"viewcount":null,"language":"en","relate_stocks":{"FLGB":"Franklin FTSE United Kingdom ETF","BBEU":"JPMorgan BetaBuilders Europe ETF","IDEV":"iShares Core MSCI International Developed Markets ETF","BNDW":"Vanguard Total World Bond ETF","TACN":"T. Rowe Price Active Core International Equity ETF","ISVL":"iShares International Developed Small Cap Value Factor ETF"},"translate_title":"随着借贷成本上升，经济学家敦促英国央行停止债券销售","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"BNDW":1.5,"IDEV":1.5,"TACN":1.5,"ISVL":1.5,"BBEU":1.5,"FLGB":1.5},"content_text":"The Bank of England has been 'behind the curve' on bond sales, economists said The Bank of England should abort its costly approach to unwinding quantitative easing, which is stoking the government’s elevated borrowing costs and costing the taxpayer billions of pounds, a group of analysts and bond investors have said.The government’s long-term borrowing costs have risen to levels not seen this century, amid unease at the country’s fiscal path and the inflationary impact of the Iran war. The yield on the 30-year gilt, the name for UK government bonds, was sent to its highest level since 1998 last month, while 10-year gilt yields remain close to post-financial crisis highs of more than 5.1 per cent struck in April.The upward pressure on UK borrowing costs forms part of a wider sell-off of long-dated government bonds that last week led US Treasury secretary Scott Bessent to double its buyback of debt; an unusual move to keep long-term debt costs down.\n\nThe market tumult – and Bessent’s subsequent intervention – has cast fresh scrutiny on the Bank of England’s unusual approach to reversing the more than £800bn of gilts it bought during the era of quantitative easing (QE). The central bank is the only major monetary authority actively selling that stockpile of bonds, in a move that adds to the supply of long-dated gilts on the market and lowers their price, which moves inversely to their yield.\n\n\n\n\n\n\nNews Updates\nStay ahead with our three daily briefings delivering all the key market moves, top business and political stories, and incisive analysis straight to your inbox.\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\nThe process, known as ‘active quantitative tightening’, is different from those adopted by other central banks, which have mostly chosen to let their bonds mature without replenishing their reserves. \n\n“At a time when the US government is using Treasury buybacks to support yields at the long end of the curve, it is reasonable to ask whether the UK still needs to be adding additional gilt supply through active sales,” said James Carter, co-head of fixed income at W1M. “The balance sheet can continue shrinking without actively selling bonds into the market.”Bank of England officials have long argued that the central bank’s active approach to quantitative tightening (QT) was necessary given the government has historically issued a greater proportion of longer-dated bonds. Without active sales, its QT programme would therefore have taken longer than those of the Federal Reserve and European Central Bank, as the bonds on its balance sheet would take longer to mature.Governor Andrew Bailey launched a staunch defence of the controversial approach, arguing in May that it would give the Bank the firepower to launch another round of QE “if needed”. But a growing number of City analysts believe that given it has shrunk the size of its balance sheet by nearly half since the programme was first launched four years ago, the central bank should end active sales at an eagerly anticipated vote next month.\n\nNeil Wilson, investor strategist at Saxo UK, told City AM the case for continuing active QT was “rather weak”, given the Bank of England has already unwound £400bn of QE-era bond buying “and is approaching balance sheet level of 2022”.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":false,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"isLaohu8Offline":false,"tenantId":"TBGLOBAL","deviceId":"web-server-community-laohu8-v3","version":"4.48.0","shortVersion":"4.48.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2662762216","isCrawlerRequest":true}