Breaking News
Investing Pro 0
🚨 NDVA surged 43%. This AI Chipmaker Could Be Next See Analysis

Bank of England's Quantitative Tightening Off to a Smooth Start

Published Nov 01, 2022 12:06PM ET Updated Nov 01, 2022 12:44PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio

By Geoffrey Smith -- The Bank of England secured a smooth start to the potentially tricky process of unwinding years of 'quantitative easing' on Tuesday, as the first of its planned sales of U.K. government bonds passed off without undue alarm.

The Bank said it sold 750 million pounds of Gilts, as planned, at auctions where bidding patterns suggested solid demand and realistic pricing. Bids for the bonds on sale totaled over £2.44 billion, covering the auctioned amount 3.26 times.

A 'bid-to-cover ratio' of over 3 is typically regarded as a satisfactory outcome by most governments' debt management offices.

The Bank is likely to breathe a small sigh of relief after what will be the first of regular operations to whittle down vast holdings of bonds accumulated over the last decade.

During that time, it has pumped a total of £838 billion into the financial system through bond purchases, keeping market interest rates lower than they would otherwise have been and finding novel ways to loosen financial conditions at a time of low growth, even when its key interest rates were close to zero.

The BoE is the first of the big advanced economy central banks to actively reduce the holdings of bonds acquired through QE. It had flagged its intention to do so in the summer but had been forced to delay the start of 'quantitative tightening' by a month after the ill-judged unfunded tax cuts of newly appointed Prime Minister Liz Truss triggered the most extreme bout of volatility in the Gilt market in 30 years.

The bond market's reaction was so violent that it forced the Bank not only to suspend its plans to sell bonds but even to resume buying them for a limited time to stave off what it called a "material risk" to the financial system. The debacle forced Truss's resignation and the appointment of Rishi Sunak as Prime Minister. Order in the market was restored as Sunak, with Chancellor of the Exchequer Jeremy Hunt, scrapped Truss's plans and signaled a return to a more balanced budgetary policy. The precise details of this are due to be laid out on November 17th.

The Bank plans another six such sales this month. In addition, it will allow other bonds in its portfolio to mature without replacing them, something that will likewise have the effect of gradually withdrawing liquidity from the financial system, and consequently pushing market interest rates higher.

The Gilt market absorbed the extra bonds without trouble on Tuesday, with yields (which move inversely to prices) falling after the operation. By 12:40 ET (16:40) GMT, the yield on the benchmark 2-Year Gilt was down 12 basis points at 3.17%.

Bank of England's Quantitative Tightening Off to a Smooth Start

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your profile, will be public on and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Jonas Jonsey.
Jonas Jonsey. Nov 01, 2022 1:21PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
60 billionnew £ smoothly printed, worked really well for the leveraged pension funds...
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email