Foreign investors reduce UK gilt holdings

Brexit, UK, European Union, EU

Foreign investors have cut their gilt holdings, according to Bank of England data covering the first full month following the UK’s vote to leave the European Union.

Foreign-owned gilt holdings fell £4.4bn in July, their first drop since February and their steepest fall since January.

The data pre-dates the Bank of England’s stimulus measures in August, which included a rate cut to 0.25 per cent and a £60bn expansion of quantitative easing.

Its buyback of government bonds got off to a bumpy start when it offered to buy back £1.17bn of long-dated gilts but received offers of only £1.11bn, leaving it with a shortfall of £52m.

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

The yield on the 4.75 per cent March 2020 gilt dropped to -0.012 per cent, along with the 3.75 per cent September 2019 gilt. The 4.5 per cent March 2019 gilt dropped to -0.010 per cent.