BoE’s stimulus plan frustrated as gilt buyback falls short

Bank-of-England-Building-BoE-Bus-700x450.jpgThe Bank of England has failed to attract enough investors to buyback Government bonds following its post-Brexit economic stimulus plan.

The Bank offered to buy back £1.17bn of long-dated gilts but received offers of only £1.11bn, leaving it with a shortfall of £52m.

This morning the BoE will reveal its plans to get investors to part with Government bonds as it kicks off additional stimulus under its new £60bn quantitative easing programme.

In a statement, the Bank says it will include the £52m shortfall from the sale in the the second half of the current six-month purchase programme. Details of these purchases will be announced on 3 November 2016.

The lower than expected appetite for gilts buyback caused yields on long-dated Government bonds to fall to record lows.

Yields on 20-year gilts fell to 1.2 per cent, while those on 30-year bonds fell to 1.36 per cent as the central bank is expected to increase the price to pay reluctant investors to buy back gilts.

Société Générale UK rate strategist Jason Simpson told Reuters: “It is a little surprising that this comes on the first week… it is quite early in the whole process, which will be a worry for the Bank of England.”