Latest news with #quantitativetightening
Reuters
07-08-2025
- Business
- Reuters
Bank of England sees bigger QT impact on gilt yields
LONDON, Aug 7 (Reuters) - The Bank of England said on Thursday it estimates that its programme to cut its bond holdings may have added as much as a quarter of a percentage point to the cost of 10-year British government borrowing, slightly more than it thought a year ago. Britain's central bank bought 875 billion pounds ($1.17 trillion) of gilts between 2009 and 2021 to support the economy through successive crises. It has reduced that debt pile by more than 300 billion pounds since 2022, through a mix of bond sales and allowing existing bonds to mature. Each August, the BoE assesses the impact of the programme over the past year, before its Monetary Policy Committee in September sets the pace at which bond holdings should fall over the following 12 months. Since October 2024 the BoE has reduced its holdings by 100 billion pounds - largely due to 87 billion pounds of gilts which matured. Market participants polled by the BoE earlier this year expected the stockpile to drop by 75 billion pounds in the 12 months from October 2025. In a report published after its August MPC meeting, the BoE revised up its estimate of the total impact of its quantitative tightening programme on 10-year gilt yields to 0.15-0.25 percentage points from 0.1-0.2 percentage points a year ago. This reflected the extra QT over the past year, it said. BoE Deputy Governor Dave Ramsden said at a press conference that the central bank intended to stick with its existing approach to QT, which included conducting gilt sales in a "relatively gradual and predictable manner". But he said it was too soon to give more detailed guidance on the future pace of QT. Market analysts at U.S. bank Citi said the report and Ramsden's comments made them more sure in their view that the BoE would cut the annual pace of QT to 75 billion pounds next month, and had led to modest price gains for longer-dated gilts on expectations of fewer sales. "Prudence alone suggests a slower pace, with either a subtle shift shorter by adjusting the longer maturity buckets to 7-15 years and 15 years-plus or just ending long sales completely," they said. Ten-year gilt yields have risen by about 3.25 percentage points since the start of QT in February 2022 and by 0.55 percentage points over the past year. Thirty-year gilt yields have risen more sharply, however, up by nearly a full percentage point over the last 12 months, and some economists think the BoE could skew its sales away from these gilts, or even stop them entirely. "We are very cognisant of developments in gilt markets, particularly at the long end. We have seen that spread between 30-year and 10-year widen," Ramsden said, but added that other bond markets had seen similar moves. The BoE's assessment noted that sales of long-dated gilts could have a bigger impact on liquidity due to reduced demand in the market from pension funds. "These same shifts in the gilt market could pose a risk that QT has a greater impact on market functioning than previously," it said. ($1 = 0.7454 pounds)
Bloomberg
07-08-2025
- Business
- Bloomberg
BOE Highlights Risk of Greater QT Impact in Hint at Slowing Pace
The Bank of England warned that its long-dated bond sales risk amplifying strains in part of the gilt market, a hint that it may need to slow the pace of its balance sheet run-off. In analysis intended to inform investors before an annual decision on quantitative tightening, officials said that against a backdrop of lower demand for long-term assets, the sales could have a 'larger impact on market liquidity.'
Reuters
07-08-2025
- Business
- Reuters
Bank of England nudges up estimate of QT impact on gilts
LONDON, Aug 7 (Reuters) - The Bank of England said on Thursday it estimates that its bond selling programme may have added as much as a quarter of a percentage point to the cost of 10-year British government borrowing, slightly more than it thought a year ago. Britain's central bank has reduced the 875 billion pounds of gilts which it bought between 2009 and 2021 by more than 300 billion pounds since 2022, through a mix of bond sales and allowing existing bonds to mature. Each August the BoE assesses the impact of the programme over the past year before its Monetary Policy Committee in September sets the pace at which bond holdings should fall over the following 12 months. Since October 2024 the BoE has reduced its holdings by 100 billion pounds - largely due to the 87 billion pounds of gilts which matured. Market partipants polled by the BoE earlier this year expected the stockpile to drop by 75 billion pounds over the coming 12 months. In a report published after its August MPC meeting, the BoE revised up its estimate of the cumulative impact of its quantiative tightening programme on 10-year gilt yields to 0.15-0.25 percentage points from 0.1-0.2 percentage points a year ago, which it said reflected the extra QT conducted over the past year. Ten-year gilt yields have risen by about 3.25 percentage points since the start of QT in February 2022 and by 0.55 percentage points over the past year. Thirty-year gilt yields have risen more sharply, however, up by nearly a full percentage point over the last 12 months, and some economists think the BoE could skew its sales in the coming year away from these gilts, or even stop them entirely. The BoE's assessment did not address this possiblity directly but noted that its sales of long-dated gilts could have a bigger impact on liqudity due to reduced demand in the market from pension funds. "These same shifts in the gilt market could pose a risk that QT has a greater impact on market functioning than previously. In an environment with lower demand for long-term assets, QT could have a larger impact on market liquidity," it said. Keywords: BRITAIN BOE/QT
Bloomberg
14-07-2025
- Business
- Bloomberg
Wall Street Says Fed Governor Waller's Estimate of Ample Reserves Is Too Low
Wall Street strategists are arguing that Federal Reserve Governor Christopher Waller's forecast of the amount of ample reserves in the financial system needed to prevent disruption should actually be higher. Waller last week said the Fed can lower bank reserves to around $2.7 trillion, from a current level of about $3.34 trillion, allowing the central bank to keep cutting the size of its balance-sheet, a process known as quantitative tightening.
Telegraph
14-07-2025
- Business
- Telegraph
Bailey warns Reform will make ‘no money' from Bank of England raid
Reform wants to stop this money being paid out and use it instead to help fund an increase in the tax-free personal allowance to £20,000, as well as tax cuts for businesses. But Mr Bailey warned these savings were 'illusory', telling The Times: 'Please don't rely on that as income because it's not gonna be there.' 'Akin to a tax on banks' The Bank's unwinding of its money printing programme has come under increasing scrutiny owing to estimates that it could cost the taxpayer up to £150bn. The Telegraph revealed that Richard Tice, Reform's deputy leader, wrote to the Bank last month, accusing Threadneedle Street of prioritising bank profits over the interests of working people. Mr Tice said the unwinding of this programme, known as quantitative tightening (QT), was pushing up borrowing costs and piling pressure on the public finances. The Bank is reportedly preparing to fight back against accusations that QE did not provide value for money by publishing estimates of how much its bond buying reduced UK borrowing costs. Mr Bailey also published a five-page riposte to Mr Tice in which he warned that Reform's plan would hurt lending to the wider economy. He also warned that removing interest on reserves 'is akin to a tax on banks'. Mr Tice said he was planning to take up an offer by Mr Bailey to meet, although a date has not yet been confirmed He said: 'He is accepting my point on QT it sounds, which is good; and I look forward to discussing the interest payments when we meet. He does accept it is up for debate.' Mr Bailey also suggested last week that recent volatility in the bond market could change the way it sells its huge stockpile of UK debt going forward. The Bank is currently losing much more money on its stockpile of long-term debt because it is selling the bonds through QE evenly, resulting in steeper losses on long-term debt. While Mr Bailey would not be drawn on a looming decision in September, he said policymakers would 'look carefully' at how the rise in long-term borrowing costs 'plays into our decision'.
